How to Reduce Expenses for Your Small Business
Small businesses are always on the lookout for ways to improve efficiency and profits. While increasing sales and revenue typically receive the most attention, looking for ways to reduce expenses can be an equally effective strategy.
Assuming you’re already pulling all the right strings to maximize your revenue for your small business, the following are seven simple ways you can reduce expenses without compromising on quality.
Comparing prices can be a double-edged sword. It will help you discover the most competitively-priced suppliers out there. Also you inform your current suppliers of your intention to price shop, you may wind up getting discounts to keep you from taking your business elsewhere.
Cut production costs
There are a few ideas here. For instance, you should consider selling leftover cardboard, paper, and metal instead of sending the material to recycling yards or disposing of them in the local landfill. You’ll make more money that way. Additionally, you might want to consider centralizing or consolidating your production space and lease unused space for extra revenue.
Reduce staffing costs
You need to tread carefully on this one, but this can be a huge money-saver. Most businesses experience temporary cash flow problems from time to time. If seasonal lulls are creating a financial hardship for your small business you might want to consider offering non-essentials the opportunity to take some bonus time off without pay. You might also consider hiring family members. Remember family members, like any other employees, are deductible as a business expense!
Improve your collections process
Unfortunately, slow-paying customers are a fact of life for most businesses. For small businesses, they can be an especially frustrating problem because they tend to operate on narrower margins and have fewer personnel dedicated to collections. If past due invoices are negatively impacting your ability to meet your day-to-day operating expenses, you might consider accounts receivable factoring. In a factoring arrangement, you basically sell your invoices to the factoring company who handles all of the collections activities in exchange for a percentage of the outstanding invoices
There are a number advantages to invoice factoring over traditional bank loans and lines of credit. For starters, factoring doesn’t require a lengthy and invasive bank audit. Furthermore, invoice factoring does not negatively impact your credit rating, and you can use your factoring funds for any purpose you choose.
Barter for business goods and services
Bartering may seem like an outdated concept for modern businesses, but it’s an idea that’s still worth exploring. After someone has provided services to your business, instead of paying them in cash, ask if you can pay them with some of the spare products you have in store. Obviously bartering isn’t appropriate for every situation and you should use caution with this one to keep from offending vendors or making them feel uneasy about your solvency.
Modernize your marketing efforts
Paid advertising can be incredibly expensive. To minimize costs, try to complement it with less costly options such as email marketing, networking, and increasing your organic reach on social media. Essentially, do less traditional advertising and invest more in digital marketing platforms.
Cut insurance costs
Start by doing price comparisons and choose only the best priced providers. You should also perform annual asset reviews to ensure that you’re not insuring assets you no longer have. For even lower premiums, lower your risk by installing fire alarms, security systems, and sprinkler systems.
Minimize your taxes
There are few better ways of minimizing business expenses than finding ways to reduce your taxes. The first step of course is to avoid penalties at all costs. This means you need to pay on time. No more late filings. Secondly, keep accurate records of all business expenses. And finally, take advantage of every available tax deduction.