Reducing overhead costs and ensuring positive cash flow is vital at any time of your business life cycle. For small and medium sized (SMEs) businesses, getting the best deals is not always easy with a lack of economies of scale so building in a cost culture in your business is key to business growth. For business owners looking to reduce overhead costs and achieve greater profitability then there are a variety of ways this can be done following these strategies:
Reducing your overhead costs
Here are 12 tips on how you can achieve greater profitability by cutting your overheads costs:
- Utilities – ensure you terminate your supply agreement within the timeframe indicated by your supplier, even if you are considering staying with them. Explore all the options available before signing a new agreement.
- Telecoms – landline, internet and mobile costs are reducing all the time, therefore you can obtain a more competitive rate by frequently reviewing costs and users. Alternatively Internet services such as Skype or Google Voice can radically ways to reduce overhead costs on phone bills to suppliers or customers abroad. Encouraging staff to use this method and schedule in these calls could even form better relationships domestically as well as abroad.
- Postage – Can documents be sent electronically? Do you have an online facility for customers receiving documents? If so this is a ways to reduce overhead costs on postage.
- Banking – Consult with your bank manager regarding your banking facilities, challenge them on your current arrangements and seek their advice on how you could potentially reduce your bank and interest charges without the need to change bank.
- Lighting – the cost of replacement lighting will have an initial cost, but will be more cost-effective in the long-term. A committed LED lighting supplier will offer payment terms which will offset capital investment costs.
- Foreign Exchange – if your business requires international currency benchmarking the current rate you receive against a fully-regulated specialists such as HiFX could offer more attractive rates.
- Insurances – With Insurance Premium Tax increasing to 12% seeking advice from a reputable insurance broker to review the market and all your long standing policies to consider whether relevant to your current and future needs and gain access to potential lower premiums rather than accepting your current arrangement.
- Travel cost-effectively – Hold teleconferences where possible, rather than travel to long distance meetings. On essential business trips, economise by planning ahead with advance booking for rail travel and hotel rooms with free cancellations available.
- Hire out under-used resources – Consider hiring equipment or vehicles you do not use constantly to other firms. Also, renting out any meeting rooms, storage or desk space available you only need at certain times could be offset against any expense.
- Go Paperless – While you may not be able to completely eliminate paper from your business, you can probably greatly reduce the amount of paper you use, which will allow you to obviously reduce overhead costs on printers, ink/toner, paper and storage space.
- Explore new employee benefits – New alternatives for providing cost-effective benefits to your employees should be examined closely, as a means of potentially reducing labour turnover, recruitment costs and pay increases.
- Sales and Marketing – all expenses related to marketing your product or service should be regularly reviewed to ensure relevant and you examine the return on investment.
Overhead cost reduction strategies.
If you have ambitious growth plans, looking for ways to reduce overhead costs will help as part of any business strategy. Independent business advice on how to reduce overhead costs could prove valuable in this instance, please contact us to find out how we can support your plan and achieve your aspirations.
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