The financial aspect of any business is stressful and difficult to master. Even companies with several accountants and financial consultants on their payroll still struggle with keeping their overhead low. There’s a lot of advice that can go into the debate of reducing your bottom line, but it’s important to first recognize excessive costs within your business platform. You’ll likely find that you can make a huge difference in your spending by cutting back on a few key areas.
Office space and the resulting upkeep are very expensive. You’re looking at an average of $5,000 per month for a small office and two or three times that for larger corporations. Add about $200 per month for every employee who works there, and that’s enough to run startups into the ground.
To cut costs on office space, there are a few things you can do. First of all, if you’re a small startup, an office space may be totally unnecessary. You might find that your employees can work remotely by using a virtual office and project management software.
If giving up your office space altogether is impossible, try to downsize. If you have more space than you need, then look for a smaller place.
Another major cost for businesses is labor, and small companies often have far too much to uphold. It might seem necessary to hire extra people to sustain a business, but remember that people are paid hourly. If you have one employee who can do the work of two in the same amount of time, there’s no point in hiring that extra person.
Ideally, you should be limiting your labor costs to between 15 and 30 percent of your gross income. Anything higher than that means you’re overpaying and need to rethink your financial strategy.
For some organizations, travel is inevitable, whether for client meetings or business deals. But is all the traveling you do necessary? Thanks to technology, you can meet face-to-face with people all over the world, saving a trip in many instances.
Obviously, there will be some trips where a phone call or video call won’t cut it. When travel is necessary, look for ways to reduce costs. Many online travel agencies, such as Travelocity or Expedia, offer special discounts and freebies to companies who book their travel through one of these services. Since the cost of airfare and lodging is constantly rising, these discounts can add up significantly.
You should always reimburse your employees when they purchase something for the company, but watch out for excessive spending. Either due to lack of education or a desire to cheat the system, employees will often try to get reimbursed for extras.
The best way to fight these freebies is through education and strict policies. Let employees know that reimbursements are allowed, but that receipts will be required to prove the purchases were relevant to the business.
It’s okay to splurge on a nicer coffee pot or install a treadmill in the break room in order to raise a little employee morale. However, the luxuries you install in your office can quickly get out of hand. Make sure anything you purchase to decorate or furnish the office has a purpose behind it and will be worthwhile.
Paper and Printing
Have you been fighting the shift towards digital operations? You don’t really need hard copies of everything, particularly when you can back up your files several different ways on the cloud. This significantly reduces your risk of lost data and saves you big in the long run.
Additionally, communications with your customers can all take place online rather than through snail mail. Ask customers for an email address to connect with you on social media in order to reduce the amount of paper used and lower your overhead.
It’s always wise to regularly evaluate the costs associated with running a business. You’ll often find expenses that don’t deliver real returns and take away from your bottom line. This is a great way for small businesses to get on their feet quickly and avoid falling behind when getting started.