5 Cost Effective Ways to Lower Your Business Overhead Costs
In the wake of ongoing fluctuations after the economic downturn, more companies are turning their attention to cost cutting as a way to boost profitability. This is a smart move, since internal overhead costs can definitely be controlled, even if national or international economic trends cannot be changed.
But once you have made the decision to tackle lowering your business overhead expenses, you must then determine which cost areas to address first. In this article, learn about five important and cost effective ways you can lower your business overhead costs.Tip 1: Spend your own time wisely.
The fewer employees your company has, the more important this first tip becomes. Here, your goal is to spend your time in areas where you can achieve the greatest impact on your company’s bottom line. Perhaps this is as part of the sales effort. Or maybe you are adept at all things IT and can do a great job evaluating tools to automate routine processes.
But if you are not skilled in an area (or you simply hate it), consider spending some of your hard-earned cash to hire someone else to do it. This will free up your high dollar time to generate profits and productivity in the ways you can best achieve.
What to do: As an example, hiring a part-time bookkeeper might cost you $12 or $15 per hour. But if your time is worth $60 or $100 per hour, you are saving a chunk of change with each of your hours that gets freed up from tasks it is cheaper to pay someone else to do.
Tip 2: Use up your existing supplies and then go paperless.
If you just bought a huge new shipment of paper goods, clearly you will want to use those up (or find a willing buyer) before making any big changes.
But aside from saving you money on everything from equipment maintenance to ink and electricity, going paperless will also reduce the time your staff spends on mundane tasks (like visiting the paper file cabinet again and again) endear you to your planet-conscious customers.
What to do: Take a look at what your company spends on paper and paper by-products each month. Include ink, toner, electricity, maintenance contracts, business cards, etc. Then you can decide if it makes sense to go paperless.Tip 3: Reconsider your website expenses.
Yes, using the Internet, email and online tools can be cheaper than doing everything the old-fashioned way with paper, but this doesn’t mean it is cost-free.
One common place where companies overpay is for web maintenance and hosting services. This is why, even before you switch, you should have a working transfer website guide in place to facilitate a move to a lower-priced provider.
In a similar fashion, by switching to internet-assisted office aids, such as Skype or Google Voice for phone service and a virtual office with telecommuting options, you can find creative ways to trim office maintenance expenses.
What to do: Make a point of doing an annual IT cost comparison to be sure you aren’t paying more than you should. If you find a lower cost and determine the value (what you get) to be comparable, work with your team to create a transfer website guide and get your services transferred as soon as possible to lower your overhead.
Tip 4: Reconsider how you take and make online payments.
In most cases, the days of manual paper invoicing have gone the way of the dinosaur and Cro Magnon man. However, all online payment services and business credit card services are not created equally when it comes to pricing.
With a little researching effort, it is often possible to reconfigure how you take and make payments to lower both merchant fees and your overhead.
What to do: Take stock of each payment method you use (sending and receiving) and compare that against what you bring in with each method. Is what you pay out in transaction fees and administration costs more than what you bring in? That is a sign to remove that payment method from your menu of options in favor of something cheaper and more popular with your customers.
Tip 5: Clean out your supply closets and use them to set limits on purchasing.
On a daily basis, each staff member at your company is very busy doing their own job. When they need staples, or stamps, or a new laptop, they may not even think to check and see if another department has extras before ordering another of whatever it is.
Over time, this can develop into one of the biggest slow leaks in any company’s bottom line, but the good news is, it can be plugged up with relative ease.
What to do: Designate staff to clean out and inventory the contents of all your extra supplies (or hire cheaper contract staff to do this for you). Tally everything up and make it available to all departments as part of a central “pot” of supplies. Freeze ordering on overstocked items until the current inventory is depleted. Then take a look at your past purchase records and set a price cap on each item for future orders. Designate one employee to review and approve all new orders to ensure pricing caps are enforced.
These five tips can add up to quite a difference in your company’s monthly overhead expenses. Each will take some time and research to pull off, so it is important to determine which staff members can oversee each area most efficiently and expediently. But especially for startup or smaller companies where receivables and payables are often close enough to wave at each other on a monthly basis, taking the extra time to work on these tips can significantly ease cash flow issues (not to mention your stress!) over both the short and long-term.