There is someone paid in every company to give away money. Yes paid to give away money. They are called the CEO. Invariably we find that profitable companies are disciplined ones, they stick to their zero-based budgets, they delegate responsibility for staying within the budget. Obviously, without sales and incoming revenue, a business can’t grow. But it’s equally true that outgoing expenses if left unchecked, will keep a business from thriving as well.
Here are some basic ways to reduce costs, so you can plough your hard-earned profits into building the business and focus on what matters:
Use analytics to measure the success of your initiatives.
Rank your social media and marketing campaigns by their return on investment. If you have outsourced that function, make sure that your outsourced company is reporting on the analytics in this format. It’s one thing to launch a new digital marketing campaign or dramatically upgrade your business website. But the effort is largely worthless without a way to analyse its effectiveness. Various digital tools, such as Google Analytics and Facebook Analytics, enable you to “watch users’ activity and see whether they interact, they click through to the website, how long is spent on the page and whether they invest in the product/service that you’re offering.” The best though is the ranking of campaigns by return on investment. In fact out of our TAB members, Eagle Point Partner make that sort of analytics their business.
Purchase equipment that suits your business. Not every piece of equipment purchased for your business must be brand-new and/or top of the line (i.e., the most expensive). Refurbished office and warehouse equipment may be suitable for your needs, as long you check out the supplier beforehand and ascertain the quality of their merchandise. Another option is buying equipment that serves multiple functions—for example, a copy machine that also scans documents and offers other key services. Calculating the return on investment is again important. It is no good buying some fancy software or a new customer tool, if you do not invest in the training, and measure the output against the objectives set out. It might be a great idea for another company, but the culture of your company may not be ready to exploit it and get that return.
Go green. If you haven’t already done so, the time has come to convert your business to a “paperless” environment. Not only is this ecologically responsible—a fact you can share with eco-minded customers—the use of digital technology to replace paper will help cut costs. Installation of energy-efficient utilities will certainly reduce expenses related to the building or warehouse in which your business is stored.
Look into acquiring (or leasing) new technology that optimises routine operations. There will be initial acquisition costs, but over time, you’ll likely see the kind of cost reductions you’re looking for. The savings members have obtained from implementing paperless office by introducing document management systems go way beyond the savings on space, but the massive time-saving from looking up documents, filing, retrieving, archiving, shredding etc. TAB in Ireland went paperless from the first day of operation 6 years ago. Something we never regretted.
Put money aside for preventive maintenance and repairs. Even the best technology (digital and otherwise) will run down after time, needing to be fixed, upgraded or replaced completely. Rather than wait for things to break down—which they seem to do at the times you require their services most!—spend money on preventive maintenance and minor repairs. Waiting until a major malfunction occurs will invariably cost more money than your business can afford. Having proper contracts in place on your equipment means that you can buy what they do, rather than the machines itself. Most are familiar with the idea of “print managed service”. This is where you pay for a page of print, not the printer and paper. This means that you can budget more easily and that the supplier can have preventative maintenance being done when their technicians are not carrying out urgent repairs.
Become more strategic with taxable deductions. If you (or your accountant/accounting team) aren’t making the most of normal business deductions, you might be needlessly sacrificing a great deal of money. Of course, you should never cut corners on taxes or do anything that might be considered fraudulent by the Revenue. A knowledgeable accountant or accounting firm can guide you in the best ways to deduct business expenses in a thoroughly legal manner.
Extravagant spending and not paying attention to where expenditures are made is too risky a practice to sustain for long. Reducing unnecessary expenses, on the other hand, increases the chances you’ll have cash on hand for what’s genuinely important further down the road.
Charge staff for the use of your facilities. I learned many years ago that a restaurant manager that has good controls understands their margin intimately. However, if food is given away to staff on breaks, it becomes very difficult to measure. The answer one member gave was that all staff purchases had to go through the epos system. They got a 90% discount on what regular customers got. However, it means that the margin reduction was fully explainable and thus controlled and there were no attempts to bring home food for the dog……