You can compare your business expenses to a house with front and back doors. Your front door is where the money comes in, like so many welcome house guests. Your back door is where the money leaves. Some of the money walks out in plain sight, with little to nothing you can do to stop it. But other money seems to sneak out when you’re not looking — often when you’re watching the front door so carefully it’s like you forgot the back door was wide open. Sound familiar? You’re not alone. And you’re not stuck, either. Consider these five ways you can put a tighter seal on that back door to keep more money inside the house, right where you want it.
1. Organize Your Office
In a recent survey by Office Max, 77 percent of workers reported that clutter hurt productivity. Though a report on the importance of office organization from one of the nation’s largest vendors of office organization equipment could fairly be suspected of bias, that can’t be said of custom research firm GfK Roper’s findings that looking for misplaced items cost U.S. businesses a week’s worth of productivity each year. Since those are hours you pay for, anything you do to reduce those hours is pure savings.
2. Leverage Memberships
Membership rewards, plans, and kickbacks are everywhere, but research shows they work poorly for consumers and the stores that offer them. For stores, it’s about their effectiveness, but for consumers it’s because people rarely shop at a scale that justifies joining the club or rewards program. It’s different for businesses, though. In his landmark book The Four Hour Workweek, Tim Ferriss describes in detail how business-scale expenses on a simple air miles credit card can add up to free travel in less than a year. Your 1 percent cash back for your office supply loyalty card and 2 percent rebate on your gas card may have the same scalability, depending on your spending patterns.
3. Consider Nontraditional Staffing
A full-time employee you need is a blessing, but a full-time employee you don’t need can be a burden. The trouble is, some skills you only need part of the time require a full-time worker if you’re staffing traditionally. Nontraditional staffing — using part-time contractors, outsourcing to countries with low wages but reasonable expertise, or picking up an intern from a local collage — can often get you the same skills at a much lower price.
4. Negotiate … Then Renegotiate … Then Negotiate Again
Given that sales and negotiation are at the heart of every business, it’s surprising how rarely business owners renegotiate their own contracts. According to experts including financial guru Rob Kiyosaki and Marc Freeman, author of Renegotiate With Integrity, renegotiating a disadvantageous contract is a standard practice and often easier than you expect. As a business owner, you would probably prefer to offer a discount to a customer than to lose that customer altogether. Other business owners are likely to feel the same way. This applies both to paying less for the same service, or downgrading an expensive contract you only need part of.
5. Look for Hidden Waste
Even the tightest ship has leaks, and overlooked wastes of time, materials, and supplies can be very costly. On the productivity side, research firm Challenger, Gray & Christmas Inc. reported that the at-work hours spent on researching and reading about the NCAA Basketball tournament in March could consume as much as $1.2 billion over the course of the tournament. This seemingly harmless chink in your spending armor, combined with wasted paper from things like having to reprint documents and leaving your a/c on overnight, can add up to real costs over the course of a year.
Always remember there are two ways to increase your profit margin: Bring more money in or let less money go out. New customers are more exciting than turning off light switches and organizing your workspace, but it takes money to make money while saving money costs very little. Closing the back door can be some of the cheapest and easiest extra profit you make this year.