The key to reducing expenses is to regularly review the effect of change on your business
In times of recession or changing economic conditions, business owners should be looking for ways to reduce their expenses in preparation for challenging times. A few years ago, when I wrote the book Profit Yourself Healthy, I came up with this list of 107 ways to reduce expenses. I have updated this with 10 more key areas to reduce your costs. Pick a few of these and figure out how much money you could save in any given year. The number might astound you!
- Ask for cash discounts from your supplier for early payment.
- Hold cash as long as possible if there are no discounts.
- Require two signatures on all cheques, contracts, etc.
- Charge interest on overdue payments from customers.
- Credit cards must be paid on time to avoid charges.
- Avoid issuing company credit cards to employees.
- Consider contracting out payroll services.
- Avoid late payments to suppliers to avoid penalties.
- Set up alerts for scheduling payments.
- Read your statements regularly to monitor cash flow.
- Avoid giving credit to your customers whenever possible – you are not their bank, and offering credit is probably costing you money.
- Have a vibrant A/R collection process to improve cash flow.
- Check the rates you are being charged for accepting credit cards and ask for better pricing regularly.
- For extra cash, consider investing it in a short-term GIC to earn interest.
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Accounting and Insurance:
- Get multiple insurance quotes regularly.
- Consider self-insurance programs for employee health benefits.
- Raise deductibles to lower insurance costs.
- Ask your insurance agent what you can do in your business to reduce risk and get better rates.
- Consider in-house bookkeeping.
- Consider farming out your bookkeeping.
- Ask your accountant for a reduced rate.
- Make sure to take the time with your accountant to get a clear financial understanding of your business.
- Review your advertising costs quarterly and measure them against results.
- Contact vendors for co-op dollars for advertising spending.
- Never advertise just because everybody else does it – have a plan.
- Cut your advertising budget in half for one year and see what happens. I did once and my sales went up.
- Try new, cheaper advertising methods.
- Start a blog.
- Use Facebook, LinkedIn, and other social media – if you can maintain them.
- Use YouTube for promotion.
- Start an e-newsletter and cancel your paper one.
- Bag-stuff your customers with information and offers that will bring them back into your business.
- Give free seminars to your customers using your staff and vendors as speakers.
- Try to get free publicity!
- Review all consulting fees regularly to ensure value for money.
- Consider contracting out those things that are costing you money and labour.
- Pay consultants to train your staff in sales for better results.
- Consider free training for people just starting out in the consulting business and looking for gigs.
- Watch for creeping costs in consulting, and entertain hiring your consultant as an employee if this will save you money.
- Hire freelancers who will work at home and reduce your costs.
- Monitor your turns and use inventory systems to have just-in-time inventory practices.
- Sell off unused inventory at reduced prices to turn that inventory into cash.
- Put products on sale before expiry dates.
- Smart buying can save you money but don’t overbuy because something is on sale.
- Use an inventory management system to manage inventory purchases and levels.
- Train your staff who order your inventory to adhere to your system and to make smart choices.
Lease and Rent:
- Look for ways to reduce your rent and lease costs. Ask for reduced rates.
- Consider your long-term strategic plan before entering extended leases.
- Look for ways to purchase your building or site as a way to reduce costs and increase your investments.
- Reduce the size of your rental space by eliminating products that don’t sell and focusing on your key products.
- Operate your business out of your house if you can.
- Consider buying your own building and leasing out the areas you don’t use.
- Consider giving your staff per diem rates instead of blanket coverage of meals.
- Eliminate the alcohol – many companies no longer pay for their staff to drink, and neither should you.
- Find ways to get your suppliers to take your staff out for training dinners.
- Consider potluck dinners for company events.
- Don’t hold meetings where you have to buy meals.
- Review your memberships regularly to see if you are benefiting from them.
- Make the most of association benefits to reduce insurance, travel, and shipping costs.
- At trade shows and association events, have a plan to come away with a money-making idea.
- Look for opportunities to join buying groups or alliances to reduce costs.
Repairs and Maintenance:
- Keep track of your equipment by asking contractors to sign a sheet attached to the equipment each time it is serviced.
- Eliminate equipment costing you in repairs and replace it with new or slightly used alternatives.
- Get multiple quotes on expensive repairs.
- Learn to fix stuff yourself.
- Find contractors that will work at lower rates for smaller projects.
- Only buy products in bulk if you will be using them on a very regular basis. Don’t buy two years’ worth of anything.
- Go paperless if you can.
- Get a service contract for photocopiers and printers to reduce expensive toner pricing.
- Keep track of supplies to avoid employee home use.
- Check your pricing of office suppliers.
- Avoid travel whenever possible to reduce costs.
- Use technology for meetings where possible.
- Never fly first class. Instead, use budget hotels and airlines where possible, and save the fancy flying for when you travel with your family.
- Book early or use points.
- Have one staff member travel instead of a whole group and get them to present what they learned when back.
- Rent vehicles for travel with unlimited miles instead of paying your staff mileage rates.
- Avoid company cell phones issued to employees. Pay lump sums every month to avoid contracts and reduce abuse.
- Consider VOIP phone services to reduce costs.
- Consider eliminating your landlines.
- Eliminate extra phone services that you no longer use or need.
- Save energy by painting with bright colours and utilizing natural light.
- Turn your computers off at night, saving you $50 per computer per year.
- Turn off air conditioners and heaters when there is no one in your building to save energy.
- Change your filters regularly to reduce energy usage.
- Buy only energy-efficient equipment when replacing or investing.
- Get a free energy audit.
- Look for energy credits to reduce your load.
- Replace expensive energy-burning lights with new efficient ones.
- Use technology to reduce energy costs.
- Search for inexpensive local web hosting.
- Use cloud storage instead of local servers to reduce energy costs.
- Buy used vehicles for your company whenever possible to reduce loss of investment.
- Have logbooks for vehicles to ensure proper use.
- Eliminate collision insurance on older vehicles to reduce costs.
- Trade vehicle repairs for your goods and services.
- Consider offering mileage rates to your staff instead of buying company vehicles.
Wages and Benefits:
- Review your scheduling hours weekly.
- Consider cutting your hours of operation by looking closely at your customer activities and times of patronage.
- Offer wellness days and unpaid leave to staff members you want to keep on.
- Review your staff compensation regularly to ensure it is fair and to avoid staff turnover.
- Consider profit-sharing programs to incentivize staff.
- Be slow to hire and quick to fire.
- Have regular employee performance reviews to ensure that they are focused on their job and know what is expected of them.
- Consider interns or crowdsourcing where possible to reduce your costs.
- Stagger working hours to ensure your business is adequately staffed during the times that your customers need your help.
- Close on holidays or days when business is slow.
- Send staff home when it’s slow by asking who would like to take the rest of the day off.
- Outsource HR and payroll to external providers when feasible to save money.
- Consider part-time employees when possible. In some cases, this can result in labour cost savings and give you additional capacity when needed.
- Price your waste contracts on an annual basis.
- Recycle as much as possible.
- Look where your company creates waste, and try eliminating it at the source.
- Reduce downtime by ensuring your equipment is in good working order.
- Review your workflow to increase efficiency.
- Eliminate waste in your operation process by reducing rejection rates.
- Implement the use of an operations manual and Standard Operating Procedures to avoid confusion and ensure standardization.
While you may have some other specific areas depending on your organization, the key to reducing expenses is to regularly review the effect of change in the business, including changes on your income statement. Why have certain things changed? What are you doing differently? By operating in a lean fashion, you can reduce your debt levels, increase profitability and ensure that your business is sustainable through good times and bad.
Dave Fuller, MBA, is an award-winning business coach and a partner with Pivotleader Inc.
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