Businesses will always operate on a tight budget. Hence, many small business executives are always on the lookout for ways to cut down business expenses and grow revenue in order to sustain a healthy profit margin.
The two crucial factors for a healthy profit margin are – costs and revenue. To build a better profit margin, you must either lower your costs or increase your revenue. But in this competitive world, always increasing revenue is not a viable option. As overloading your employees’ creeps in, the quality of your products or service will suffer, ultimately leading to worse customer service, creating a never-ending downward spiral.
Cutting down your costs is much easier, and in this article, we will teach you just that.
Use automation and go digital
Nowadays, it has become easy to use technology instead of manpower to automate various business functions. This can lead to a dramatic reduction in operational costs. Different online options can automate administrative processes and save you hours of regular labor or the regular salary for an employee to do it. While your employees receive time to improve your company’s productivity, machines will not be prone to making mistakes.
You can replace costly telephone bills and landlines with Skype, Google Voice, WhatsApp and other communication-based technologies. You can also use BaseCamp and Google Drive for file storage and project management instead of spending money on office supplies and paper. You will also eliminate expenses from printers.
Implement invoicing and accounting software instead of a team of accountants – this can save a lot on salaries. Organize meetings and presentations online to eliminate travel expenses. MeetingBurner and WebEx are excellent options to conduct meetings and video conferences for free.
Use cards instead of petty cash
Every company has frequent unexpected costs that it pays for with petty cash. Although an immediate and a simple option in which you lose only what you give, the truth is that petty cash is rife with weaknesses and risks. Discrepancies and errors make it difficult to track while its reimbursement is especially vulnerable to mistakes and miscounting. It is time-consuming because of all the paperwork and it is susceptible to overspends, loss or theft.
An effective alternative to petty cash is a reloadable universal gift card. This card gives you complete control over your workers’ expenses and allows you to load it each month with your set “budget”. Overspends are eliminated with cap expense allowances, while the card remains secure from theft or loss as you can turn it off with just one click. Also, there is no need for paperwork and all the costs that come with it.
This card can act as a replacement for all minor business expenses like parking fees, equipment, meetings, functions, travel expenses and gas, coffees and office supplies, etc.
Lower expenses and production costs
Search your financial accounts and insurance policies to find places to save cash. Compare insurance providers to find the cheapest rate, then ask your current lender or insurance provider to match it.
Research your current insurance policies in order to make sure that you aren’t over-insured. Consolidate bank accounts and insurance policies when possible.
And never take more debts than you can handle. Most of us see only the good side of things and while you may think that your business is successful and profitable, its possible that you’re just overestimating it. Before taking on new debts, do an in-depth analysis and future predictions. The same applies to business growth. Don’t forget the effect of a debt payment and opportunity costs on cash flow. Too much debt can affect your business rating, interest rates and capabilities of taking new loans in the future.
Cut production and material costs, and optimize resources. Sell leftover paper, cardboard and metal instead of just recycling it. There are also other ways to make money off your operations. Centralize or consolidate the space needed for production to get the most out of your production property. Then lease unused properties to another company or an individual.
Measure and track your operational efficiency to optimize and lower the use of available resources. Develop a performance parameter that reflects your efficiency goals.
The management of your expenses will have a direct influence on your profit margin. In this uncertain economy, every dollar counts, and even the smallest increase in revenue or decrease in expenses can result in bigger business profitability. Digitalize processes, use cards and lower your expenses whenever you can.