What you pay for the day-to-day operations of your business is called your operating costs. Understanding these costs and working to reduce them where possible is important to have a more successful and financially stable business.
Problems such as poor cash flow and small margins can be reduced if you focus on spending less money on running the business. However, you have to reduce operating costs carefully to be sure that you don’t sacrifice the quality that you deliver to your clients and customers. Otherwise, you’ll undermine your company’s reputation and growth. It's a tough balancing act, but here are five tips to help you reduce your operating costs without negatively impacting your business.
1. Start with Software
Many owners of small and medium sized
enterprises do things by hand when there are software options that can do it
for them. When you use software, you save yourself and other staff time,
promoting efficiency and reducing your operating costs. There are many
different software options to consider, including those for marketing,
accounting, customer relationship management and more. Consider whether you’re
spending a lot of time on something a computer could handle for you.
2. Outsourcing
Staffing is a huge cost, so you should also
consider outsourcing where you can, not just to save on staffing costs but also
to get better results than you might be able to achieve yourself. A specialist
in a field may be able to get you better marketing results, better legal
advice, and more. Their guidance can help you make better use of your
resources, saving you in the long run.
3. Change Suppliers and Vendors
You likely have a strong relationship with
your suppliers’ vendors, but it is simply good business practice to also look
elsewhere to see if you can lower your costs. If you have ongoing orders at a
supplier, then you may be able to negotiate a discount for your business. Or
your supplier may be willing to match lower prices that you’ve found elsewhere.
Consider setting up a quoting process and
getting at least two other quotes. This will help keep your vendors competitive
even if you keep choosing them over other options. Be sure that you’re
providing enough information that all of your quotes are accurate, or newcomers
may underestimate the job and quote too low (which could cost you money in the
long run).
4. Lose the Office Space
Do you really need to have office space, or
at least as much as you do right now? By allowing employees to work remotely,
you can significantly reduce your operating costs. You don’t need to sacrifice
connectivity to do this. There are plenty of online tools to keep you in touch
with your employees and monitor their progress on assigned tasks.
5. Energy-Efficiency
Perhaps you have to have an office space to
meet customers or host employees? Then you can try to reduce your costs by
making the office more energy-efficient and green. Better insulation or HVAC
equipment can reduce your monthly utility costs.
While many of these tips may increase your
up-front costs temporarily, you should find that they overall lower your
operating costs enough to make up for this, and then benefit you, after several
months. In the end you’ll have a healthier cash flow and stronger business
overall. Invoice factoring can help with that too. Reach out to us at J D Factors to discuss how.
