10 Ways to Reduce Business Costs

For small businesses, while increasing revenue is the big goal, minimising your operating costs is a big part of ensuring your business is a success. It's helpful to periodically review your overhead costs to ensure you're achieving value for money with your essential expenditure.

Whether you find ways to save money or time, all improvements increase the prospects of your business and leave you with more resources to reinvest.

How to reduce your operating costs

Here are 10 of the best cost reduction ideas – every business should be able to use some or most of these cost reduction strategies to increase their profitability.

1. Price shop for supplies

Vendors can be negotiated with, especially if they know you are shopping around for the best price. Try large discount suppliers as well as traditional vendors, as they may have better deals due to differing circumstances and priorities.

2. Optimise production costs

To maximise the operational efficiency of your business, analysing your production costs should be a priority. How you use your available resources will determine your costs, so identify all the ways to reduce expenditure and increase revenue. 

Such production costs optimisation methods include:

• Selling leftover packaging and manufacturing materials instead of recycling.

• Using leftover materials to create a new product.

• Leasing out unused space to another business or individual.

3. Minimise wasted time 

Being more efficient with time will help reduce costs by optimising your productivity levels. Removing distractions and time-wasting activities such as unnecessary meetings will help employees focus and make the most of their working day. There are also focus-boosting apps that motivate individuals to concentrate on their tasks. Obviously these should be combined with realistic expectations and reasonable demands.

Other ways you can minimise wasted time include automating manual tasks, where solutions exist. Using tools such as GoCardless for Xero enables you to automate invoice creation and reconciliation, freeing up valuable hours for other tasks.

4. Outsourcing software development

Software development projects require a high level of skill and employees with good coding skills tend to be expensive to employ on a permanent basis. Try outsourcing such work to a partner who can complete the project for a lot less than it would cost to employ someone permanently, whose elite skills may not always be required.2. Price shop for supplies

Vendors can be negotiated with, especially if they know you are shopping around for the best price. Try large discount suppliers as well as traditional vendors, as they may have better deals due to differing circumstances and priorities.

5. Modernise your marketing

If you are spending significant funds on traditional marketing and advertising, it will be more financially frugal to digitise your efforts. An email marketing campaign and social media promotion can all be very successful with minimal financial investment.

6. Use virtual technology

You can cut the amount of travel that is needed for meetings by going virtual. Using video conferencing technology for meetings with clients, partners and suppliers will greatly reduce business costs. Many such video chat tech is also free to use, though for longer meetings you may need to pay for a premium account.

Also use technology to reduce paperwork and make savings there too. Platforms like Google Drive are free to use and let everyone collaborate and stay on top of all documentation.

7. Compare insurance policies

You can make big savings by shopping around for a better insurance policy. It requires effort to research and communicate with multiple insurance providers, but it can reap significant financial rewards. It doesn’t necessarily mean switching providers either as you can ask your current provider to match the better rate being offered by a rival.

8. Use all staff abilities

Make sure every employee’s skills are fully used. An employee who is adept at social media usage could devise social media promotional campaigns and engage with customers on those platforms. Another employee may have excellent writing skills or knowledge of SEO so they can create content for the website. Someone with expertise should have the time and space to apply it where it's most needed, rather than being spending hours on tasks that could be delegated or, even better, automated.

9. Maximise energy efficiency

Switch to energy-efficient light bulbs such as LEDs to reduce business costs in the long run. They are cheaper to run and need replacing far less often. Then get into the habit of turning off equipment when it is not in use, or invest in occupancy sensors that take care of this for you.

10. Install a VoIP phone system

While requiring an initial investment to install, a VoIP telephone system can massively reduce costs over time, especially if your business makes a lot of calls. By moving your phone system online instead of using the traditional telephone lines, your call rates will be much cheaper. 

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