7 Ways To Reduce Business Costs Without Sacrificing Quality or Service
If you want your business to be stable and profitable, you need to make sure that you are using your cash efficiently.
Too little investment and too much spending on the wrong things can have a massive impact on your finances.
Reducing costs is a common task for all businesses, with proper research and good decision making, you can save without compromising on the quality of your products or services.
You just need to be smart about where you increase or reduce spending.
Here are some tips for reducing business costs without sacrificing quality or service:
1. Focus on efficiency
Efficiency is the key to reducing business costs. Reducing waste, improving processes, and maximising employee output all help to improve your efficiency.
Implementing better scheduling practices to improve productivity and time management can maximise your output without increasing costs.
It's just a matter of finding ways to use time and materials more efficiently. Many organisations will use project management methodologies such as RAD or Prince2 to organise tasks as efficiently as possible.
You may need to make some initial investment to improve efficiency, whether this is new equipment or staff training.
If you can make your employees more efficient through training, you are likely to make back any initial costs through long term operating savings.
Newer equipment and machinery are usually quicker and more efficient, so again you are likely to make back your initial outlay in long term savings.
Adopting and investing in new technology can also bring long term savings. Automating and streamlining current processes (like an accounting software programs that automatically imports data from other programs) can free up time and resources. There is plenty of free software available for business owners if you know where to look.
2. Negotiate With Suppliers
Negotiating with suppliers can be a great way to cut costs, this applies to all types of suppliers - manufacturers, distributors, or service providers.
Many suppliers will offer trade discounts, B2B pricing and other loyalty incentives. What a lot of suppliers don't do is actively advertise these schemes, so you will need to ask.
Suppliers are the same as any business, they want to build relationships with businesses and have long term contracts to ensure their own financial stability.
Chances are they will be happy to work with you on striking a deal, as your business is important to them (and vice versa).
Always ask suppliers about new offerings, as there are always new developments in materials and software. You may find that there is a new cheaper alternative to what you usually order.
But be careful with cheaper alternatives, you don't want to sacrifice quality.
3. Use Free Software
Software development is one of the fastest changing industries on the market, with new developments being released on what seems to be a daily basis.
Software purchases and licenses can take up a large chunk of your budget, and in some industries can cost tens of thousands of pounds.
You can purchase software outright, on a SaaS license or develop in-house. Choosing which option to take can be a dilemma for many business owners;
- Purchase new software that could bring saving but can require staff training and potentially changes to your operating methods.
- Stick with what you know, keep the same software which could potentially cost more in the long run due to inefficiency.
- Develop in house so your software does exactly what you want it to, but do you have the staff expertise and resources to do so?
This is a dilemma that software developers are well aware of, and in response many offer free versions so business owners can "try before you buy" to assess suitability and gauge how easy it is to integrate into the business.
As with any purchase, if you're not sure which one is right for you, check out reviews online and find the one that has the best price/performance ratio for your needs.
4. Maximise energy efficiency
Energy costs are rising across the globe, and businesses are feeling the pinch. Finding ways to reduce energy bills while still maintaining high levels of service has never been more important.
There are various ways you can improve energy efficiency and lower your bills.
- Use smart metering technology to monitor your energy usage in real-time, allowing you to make changes when necessary
- Install heat pumps or air conditioning systems that use less electricity than traditional systems
- Use the right light bulb, try switching out incandescent bulbs for LEDs or CFLs
- Invest in light motion detectors so lights automatically switch on and off
- Replace old equipment and machinery with newer models that are more efficient. This is a great way to streamline your processes and increase productivity, while also reducing costs
- Engage staff in energy saving methods such as making sure lights, equipment and machinery are turned off when not in use, heating is used only when and where necessary
5. Hire an Accountant
If you're looking to cut back on business expenses, one of the first things you should do is hire an accountant.
Accountants can help you stop making common financial mistakes:
- Filing VAT and tax returns late resulting in fines
- Having unreliable financial information resulting in poor business decisions
- Missing out on tax breaks and other benefits
- Paying too much or too little VAT or tax resulting in fines or overspend
An accountant can help you identify areas where you might be spending too much money, such as unnecessary travel expenses, excessive office supplies, or even employee benefits.
Once you've identified these areas, you can start making changes to save money. Ultimately, they will help you manage your cash flow more effectively.
Many accountants can point you in the right direction for additional funding so you can increase investment and spending to improve efficiency through staff training or equipment purchases.
6. Manage Inventory More Effectively
Proper inventory management can save you time and money. If you're not managing inventory effectively, you might end up with too much stock or too little.
Know Your Inventory
You need to have an accurate picture of what stock you have and how much it costed. You can do this by creating an inventory list.
It's important to know the cost of each item so your prices include the right level of mark up.
Track Your Inventory Levels
You should also track your inventory levels on a regular basis to make sure they're in line with sales projections and projections from previous months or quarters. You may want to track them daily if sales volume is high or low enough that it could affect future orders or shipments.
Order New Products Before They're Needed
If you're not managing inventory effectively, you could end up under or over stocked.
Having too much stock can drive up costs due to storage space, time for staff to organise and sort and more importantly not being able to take advantage of price fluctuations from suppliers.
Running low on stock or not having enough to fulfil orders can result in you having to pay inflated prices and expensive delivery charges to make it arrives in time for you to complete an order.
To avoid this problem, make sure you have a solid plan for how much inventory you should have on hand at any given time. Take into consideration the products you sell, customer demand for those products, and how quickly your customers want them delivered.
7. Outsource Non-core Activities
Outsourcing non-core activities can help you save money while improving service levels.
It also helps you focus on what really matters, growing your business. You can outsource tasks such as customer support, accounting, website maintenance, and even data entry.
The key is finding the right partner for the job. You want someone who is reliable and affordable, so you don't have to worry about those responsibilities taking up precious time in your schedule.
When outsourcing tasks, you need to make sure the company you use will maintain the standards that you and your customers are accustomed to. When looking for a company to use, it is important that you:
- Make sure they have experience in the industry that you're working in
- Make they can deliver quality results within your budget and time frame
- Get references from their previous clients before making any commitments
Whilst RLA Capital cannot offer financial advice, we can provide various business loans to assist with cash flow. RLA Capital would recommend speaking with your accountant if you are experiencing cash flow problems.