Maintaining control of your operating expenses is an essential part of running any business. However, when it comes to reducing your business costs, it can be difficult to know where to cut back without compromising on your business goals. Here’s how you can keep your operating costs low in order to help you remain a profitable business.
1. Create a budget
A budget takes into account the revenue your business generates and offsets this against the day-to-day expenses of running your business. This includes things like wages, materials and machinery, which are necessary to run your business. Alongside these operating expenses you will also have your overhead expenses, which includes things like rent payments, utilities bills, administrative costs and insurance.
Having a budget for both your operating expenses and overhead expenses is crucial. By estimating, tracking and analysing your monthly, quarterly and annual costs, you can more easily identify where you’re overspending and areas that you could cut back to reduce costs.
2. Invest in systems
Investing in systems that streamline processes within your business, can help you save both time and money, which can lower your overall business costs.
Think about processes your business uses day-in day-out and any particular pain points that you come across repeatedly. For example, having data and payment systems that work for you can eradicate the time spent correcting errors and prevent you spending additional time on admin that automated systems can carry out. Open banking solutions can streamline your payment processes.
Implementing effective systems and processes in your business can help to reduce immediate and long-term costs, increase your revenue and help you achieve your business goals.
3. Downsize your space
Increasing numbers of employees are now opting to work from home. An ONS report showed that the number of employees working from home increased by 37% in 2020 and that around a quarter of all businesses intended to utilise increased homeworking moving forward.
Even for businesses who can’t utilise full-time homeworking, many employees are working in a hybrid or hot desk manner.
If this is the case in your business, then downsizing your office space can be a great way to save on rent and utilities, which often represent a large proportion of overhead costs for many businesses.
4. Utilise social media
One way to lower your business costs is to reduce the amount spent on advertising. Rather than paying for ad placements in traditional media, you could instead try marketing your business through the use of social media.
Creating a social media presence is free and although you will need to dedicate employee time to building your online presence, the costs compared to traditional advertising budgets are minimal.
Social media has a range of business benefits. It’s a great way to raise awareness of your products or services, to build your brand reputation and to engage with potential customers.
In summary
Keeping a handle on your business costs is vital to ensure your business remains viable. Identifying areas where you can reduce your expenditure, such as the ones listed here, can help you to know where and how your business costs can be reduced to ensure maximum profitability.
