In times of a tough and difficult economy any business owner needs to keep a track on his expenses in spite of results showing strong sales, simply because escalating costs can eat into profits within no time.
Much too often business owners grow frustrated with weak sales and rising costs only to make fatal mistakes while cutting costs. Some of these follies are, firing or reducing the sales team, cutting down on the marketing budget or eliminating systems or technology that increase operational efficiency.
Now, provided an entrepreneur stays away from such fatal decisions he/she can adopt some of these cost cutting ideas that will surely boost his cash flow and enhance the overall health of the business.
Assess Company Finances
One of the first ideas is to prepare a detailed record of the expenses. Prepare quarterly income and expenses report that will include all details of what are the needs of the enterprise, how much is spent, how much is the budget allocated, and how much can be saved. This will give an idea as to which areas should be considered for cost cutting.
Improve Personnel Management
Instead of laying off employees, the management can stop hiring new employees, and utilize the services of the present employees to the fullest. Effective personnel management is the key to cost cutting. Assign tasks to employees who can do their best in those particular tasks. Set targets and ask employees to meet them in the allotted time.
Do not deal with consultants, since they have to be paid more as per their level of experience and expertise. If the work to be done is substantial and requires manpower, one can recruit talented and skillful freshers. These freshers in order to gain more experience, will do both quality as well as quantity jobs.
Get the details of all marketing strategies and programs that are not giving good results. Reinvent those marketing plans and relaunch them in a new and effective manner.
If possible, one can even eliminate such ineffective and cost-consuming programs. Instead of spending much on advertising and marketing, one can use the records and clients' references to draw in more business. Eliminating unnecessary marketing will surely reduce the company costs substantially.
Cut Administrative Expenses
Administrative costs also have a major part in the increase of the enterprise's operation costs. Instead of purchasing equipment and tools, a better cost control method is to take them on rent. If one wants to buy equipment, getting used but operational ones is a good idea to save on costs.
In buying office equipment, opt for good equipment with discount or search for a purchasing partner. Make sure that company employees use the office equipment to its fullest and do not waste any.
Ensure that employees do not use office phones for personal purposes. Use electricity only if it is absolutely required. Make sure everything that is purchased is used in the best possible manner.
Learn Waste Management
In any business, service or manufacturing, there is bound to be waste. Waste management can be one of the key contributors to cost reduction. Going paperless can help the firm to save lots of money.
For any internal communication, technology can be used. If the firm is a manufacturing unit, all the recyclable production waste should be processed and reused and the rest of the waste should be disposed off properly.
Look for New Business Models
By changing the approach with which one runs the business, cost cutting can be achieved. There are many business models that suit every industry. One has to choose the appropriate business model.
However, one also needs to be careful while doing so. If the right decision is not made, things can be worst. Changing the business model is a crucial decision, and the necessary steps should be taken without hastening.
Review the Available Equipment
In all organizations there are excessive equipment like, office tables, chairs, cupboards, desktops, etc., that are either damaged or are not used at all. Such equipment can either be reused or disposed off.
Reassess Vendor Contracts
There are many outsourced functions in every firm and vendors are hired for all such activities. All such contracts should be reviewed. Fresh talks can be initiated with potential vendors and after comparison of the cost incurred, the vendor can be finalized. This activity can help cost reduction in a big way.
Rethink Office Rent/Lease
If the office from which one is operating is leased, then one can look for a cheaper location. Except for service industry like hotels, spas, etc., change in location of the office will not affect the customer base. Instead, there are chances to increase the clients due to relocation.
During financial crisis, one is bound to look for short-term benefits. However, it must be also remembered that the decisions taken at such crucial times can also have a negative effect on the future of the firm. So, one must focus on the long-term benefits before taking any such decision.
These are few cost cutting ideas that can be used in offices and companies to reduce operational costs. Remember that even the smallest possible saving steps taken on the expenses will certainly contribute to the cost cutting measure of the company.