Small businesses often struggle with generating income as well as reducing costs. It’s really hard to survive the fast-paced competitive SMB environment and every small business owner knows that. Ask yourself and answer honestly: are you effectively taking time to reduce your business costs?
As an owner of a small business, your primary goal is to maintain a healthy cash flow and, at the same time, reduce expenses involved in the business. Still, no matter how much most owners try, knowledge and action are key factors in reducing costs.
Below are seven tips on how you can reduce your business costs and yield a larger profit as well. Follow these tips and your small business will be better off.
1. Eliminate Unnecessary Expenses
Make sure to have complete control over your budget. Your budget plan should show all the things needed to run your business and their costs as well. Eliminate expenses that are unnecessary or a “luxury”. Most of these expenses are purely impulsive, making you think it’s important for your line of work but isn’t really necessary.
Ask yourself these questions as a guide:
- Will it help reduce costs or increase profit?
- What benefits will I get upon buying this?
- Do I really need this now?
2. Build Strong Relationships with Your Suppliers
Relationships are crucial in the business world. As a business owner, you should always make sure to form a strong bond with your suppliers—you’ll feel the effect in the long run. Having strong relationships with suppliers opens an opportunity to get discounts to further reduce costs and increase profit.
It may also be a good idea to look for suppliers you can build a long-term relationship with (yes, we know some suppliers just relish that idea). Do this and you’ll realize massive reductions in costs in the long run!
3. Consider Buying in Bulk
As the owner, it’s your job to oversee your business as it grows. Analyze if buying materials in bulk would be more cost-efficient than buying only what is needed now. Most of the time, buying in bulk helps you reduce costs by a margin. Bulk orders usually have bigger discounts to help your business and other businesses earn a larger profit too.
4. Track Your Inventory
If you’re keen on running a successful business, make it a habit to always check your inventory. You should always be aware whether it’s time to buy more materials or put off the buying for another day. Monitoring inventory makes sure you’re not buying too much of what you really need. Also, the occasional inventory audit may surface theft issues, which you’ll need to deal with sooner than later.
5. Don’t Waste Time
Time is gold (so they say) but, in the business world, time is always synonymous with money. Wasted time can lead to expenses such as employee salaries, inventory, and leases having a low ROI. Always make sure to manage your time efficiently and avoid procrastination.
As a general rule, anything that saves time will also save you money in the long run. So make sure to always stay productive in your business because time is not always on your side!
6. Use Green Materials
Being green can also help you reduce costs. Practice reusing, reducing, and recycling materials. Materials like paper, clips etc. can be reused and recycled (which a lot of people don’t do). It also helps using cloud services like Google Docs, Dropbox, etc. to send documents to your employees—saving paper and ink.
Owning a small business doesn’t mean your business growth should be small. With effective cost reduction, you can grow your small business greatly in a shorter time period. Reducing costs can help you earn an extra profit that you can eventually use as capital to further expand your small business. Every large corporation started small, use them as your inspiration.
6. Reduce, Inefficiency with Automation & Smart Tools
Inefficiency on the job will cost you money. If something can be done using automation, do it. Manual processing of things takes a lot of time and is often more expensive—time is a limited resource. With automation, your business can save a lot of time, boost efficiency, and significantly reduce costs. There is a new breed of expense management tools, such as Bento’s employee expense cards, that not only automate your employee expense management, but can also surface issues with waste, theft and unnecessary expenses, which encompasses no less than three items on this list.
It may not be easy… but following these tips can help your business thrive in the business world!