Bolstering your business’s bottom line can be as much about cutting unnecessary expenses as increasing sales. The problem is identifying which of your current expenses are truly “unnecessary.”
Think you’re already operating on a shoestring budget? Think again. Surely you can find a frivolous expense or two to cut.
Here are five ways to reduce your expenses right now.
You don’t have to manage a multibillion-dollar corporation to take advantage of outsourcing. Consider, for example, the cost of website development. Services like Elance, Freelancer, and oDesk can help you find and contract highly qualified developers who generally charge a fraction of what you’d pay a local hire. (They compete with one another for your business, so they tend to bid competitively.)
2. Negotiate lower credit card APRs.
Many small-business owners use credit cards for working capital, minor purchases, or travel expenses. Are you paying high — say, 19 percent — annual percentage rates? Do your business a favor and negotiate a lower interest rate. You stand to save significant money over the long term. Better yet, make sure those bills get paid in full and on time.
3. Negotiate lower prices with your suppliers.
You shouldn’t just be wrangling better deals from your credit card companies; you should also negotiate with your suppliers. Most suppliers are amenable to the idea of negotiating prices, especially in this economy, and certainly they would rather do so than lose a regular customer. As leverage, try to find another supplier that’s offering lower prices, then ask your current partner to match or beat them. If they won’t, maybe it’s time to switch.
4. Avoid perpetual payments.
Perpetual payments are the ongoing stream of cash disbursements that you make to other businesses. In some cases, such as with utilities and phone service, these disbursements can’t be avoided. In other cases, such as when you lease equipment rather than own it, they can be avoided. To reduce expenses over time, opt to purchase rather than rent items such as company vehicles, manufacturing equipment, sophisticated printers, and agricultural machinery. You’ll not only stop the infinite payment stream, but also enjoy the tax benefits associated with depreciation.
5. Re-evaluate complex expenses.
A complex expense is defined as “a payment for a multifaceted and/or multi-tiered level of service.” For example, your cell phone bill, as a small-business expense, probably covers varied usage: airtime minutes per month, in/out-of-network calling, text messaging, and data. Take a look at what you’re paying for and what you actually need. Call your service provider and ask about money-saving options or consider switching to another company.
6. Automate employee time tracking
Labor is often a business’ biggest expense and studies have shown timesheet errors are not only costly to correct but can lead to expensive lawsuits. By automating the process of employee time tracking, you replace human error and manual entry with an accurate and painless timesheets-to-payroll process, while gaining valuable insights into performance and productivity.