In today’s world of high-paced growth, technological advancement and fierce competition, businesses find that they have to try harder and harder to stay competitive or even just to survive. Therefore, businesses are on the constant look-out for methods to cut their business costs, as a means of increasing their profitability. Here are a few tips on how businesses can make some drastic reductions to their expenses by making a few simple changes.
Reduce Office Space
Rent is a major cost component of most businesses; one way a business can cut its rent expenses is by minimizing its office space as much as possible. Employees can be asked to work from home, thus reducing the amount of office space required and this will have the additional benefit of reducing the cost of utilities that would have been used by these employees if they were in office. Employees, too, are likely to enjoy benefits such as the reduced cost of commuting to and from work.
Furthermore, when the rent contract is coming to an end, the business should seek to negotiate with the landlord for more favourable rates.
Take Advantage of Bulk Purchase Discounts
Suppliers often offer discounts for bulk purchases and a business can take advantage of this to reduce its expenses. A business can begin by contacting suppliers and offering them long term contracts (usually for a period of 3 years or more) and then asks suppliers for quotations on that basis. Suppliers, who will find the prospect of a long term contract attractive, will offer good discounts to win the contract.
Energy and Outsourcing
A big expense for any business is its electricity bill; a business can make reductions to its electricity bill by using methods for increasing energy efficiency such as installing LED lights and investing in alternative energy sources like solar power.
Outsourcing refers to contracting with an outside firm to provide certain services to your organization. Outsourcing is a well-loved method of cutting business costs as outsourcing a function is usually cheaper than conducting it in-house. For example, a business may find that it is more cost-effective and convenient of commercial cleaning services of cleaning companies rather than employing janitors at the workplace.
Reducing the number of full-time employees and replacing them with contract workers will significantly reduce salary and other personnel expenses of the business. Whereas full-time workers would be paid even when they are idle, contract workers are only paid for the number of hours they actually work, making contract workers a much more cost-effective option.
Business trips should be eliminated as far as possible; only business trips that are absolutely necessary should be authorized and the associated expenses should be minimized. For example, by travelling using budget airlines and using low-cost accommodation.