Running a business is not as tough as growing it further. With an increased rate of businesspeople in the market, everyone wants to beat one another. Each day new business ventures are emerging on small scales. Many fail to survive, and many thrive. It all depends upon one’s dedication, tactics, and financial management. In business, you can increase your profits by cutting unnecessary costs.
WHAT DO YOU UNDERSTAND BY COST CUTTING?
Cost-cutting is the measures adopted by a company to prevent unnecessary expenses and increase profits. These measures are generally considered during financial distress in a business.
Cost-cutting may include:
- Downsizing employees.
- Terminating some facilities.
- Reducing employee pay.
- Moving to a smaller office.
- Shifting to a less expensive area.
To initiate cost-cutting, you need to have solid financial reports of your business. You can either prepare it yourself if you are good enough or opt for financial reporting services.
WHAT ARE THE RISKS OF COST CUTTING?
Every coin has two phases; if cost-cutting has merits, so does it have demerits as well. Let us take a look at what they are:
- One of the significant expenses includes salaries and wages, so the business owners prefer layoffs as the first cost-cutting measure. However, it may have various potential expenses, such as severance pay, unemployment benefits, retiring expenses, wrongful termination lawsuits, lower morale, and overburdening the existing employees.
- If the company imposes these changes faster, it can also cause a shortage of labor and lack of production.
- If the company has been closed for a while due to cost-cutting reasons, it may not produce with its total capacity if there is a sudden spike in demand.
WHY ARE BOOKKEEPING SERVICES NECESSARY FOR YOUR BUSINESS?
Before cost-cutting, you need to make sure you have relevant bookkeeping services with you. Be it online bookkeeping services or traditional, and it doesn’t matter as long as your financial records are intact. The following factors will justify its importance in your business as a whole as well as cost-cutting:
You need bookkeeping services to set up a budget and identify which area needs more financial attention. You can prepare a strict budget for cost-cutting.
It keeps you tax-ready
Your financial reporting services keep your business tax-ready throughout the year. Your bookkeeper will let you know if you can apply for a tax return and other ways to benefit from tax as per the law.
Keeps your finances organized
This is one of the significant merits of having financial reporting services, and you have your financial reports organized. Having adequately maintained accounts can allow you to identify how to cut costs without causing damage to anyone.
Having your books organized protects you from legal issues and makes sure you are carrying out your finances as per the law.
Investors tend to look around for businesses that have their finances intact. Therefore it allows you to attract investors and also maintain good relations with your bank.
Adds Up your experience
With time you learn to deal with your finances better and have good books. With accurate information about your finances, you can understand your business better and recognize your previous mistakes.
Peace of mind
Disorganized books take your peace away and vice versa. One can lay back at ease knowing their finances are correctly recorded, and they don’t have to look for hours for a specific financial statement.
HOW TO CUT COSTS IN YOUR GROWING BUSINESS?
1. Cut down advertising costs
You can cut down your expensive advertisement costs and use its alternatives instead. Thanks to growing technology, you can advertise your business to a more significant sector of people at low prices. Some of the platforms even provide free advertisements. Some specialists, such as Marissa K. Haynes of Wealth Management Group, of NA, LLC, a 15-year-old business, believe public relations are a much cheaper and better advertising alternative.
You can also cut down costs on even paid google ads, use SEO techniques, and create youtube videos.
2. Use smart Thermostat
Heating and air conditioning expenses are not something you can negotiate with.
Even the slightest changes in your facility’s environment temperature can compromise your customer’s comfort and your employee’s production capabilities. However, that doesn’t sum up to no other choice of cutting costs on air conditioning.
Companies like Honeywell, who offer intelligent thermostats, can help you cut costs on climate control costs without undermining your comfort.
If your climate requirements are more complex, you must consider a smart thermostat or a learning thermostat. Innovative thermostat technologies are generally fresh and guarantee immense benefits.
However, retail smart thermostats are ideal for homes or small commercial-oriented areas. Those having more extensive facilities will have to invest in commercial climate control systems that are relatively more expensive but potentially more cost-effective.
3. Consider passive energy-saving steps
Integrate your Smart Thermostat with some passive energy-saving steps which will not only result in decreasing your climate control costs but also save you on the lighting system and carbon footprints:
- Solar power: if you have taken accountability for your business’s mechanical appliances. We recommend investing in energy-efficient alternatives as per your budget. Use your financial reporting services and see how much you can reserve for this cause. We recommend using solar power for your building’s power source.
- Tight seals: if your building is old, you can caulk and weatherstrip the heat loss points such as windows and door frames, utility line entries, and air vents. If you work in a small space, a single weatherstrip roll and a caulk tube must be sufficient.
- Double Pane Windows: double pane windows are a bit more expensive than your traditional single-pane windows but last longer. Therefore they are a value of money. They cost anywhere between $350-$850. Consider your financial reporting services and pick the most affordable options as per your budget.
4. Cut costs on your paper use
Cutting costs on your paper use can be as effective as saving on your energy and water. Moreover, it is better for the environment. Follow the suggestions mentioned below to reduce your paper use.
- Print and copy on both sides of the paper; it can halve your paper costs.
- You can switch to digital file-sharing methods as Delivered secured instead of your traditional courier services.
- Use waste paper for notes and scratch.
- Reduce margins and small down your font sizes on printed reports.
- Take off your company’s name at every possible time.
- Let your vendors and postal mail sources know when any of your employees don’t work there anymore.
5. Turn off unnecessary lights, appliances, and machinery
This a self-explanatory and straightforward method that is powered by common sense to cut costs on power. The only effort that is to be made is getting used to saving on energy like this.
This method is especially needed in white-collar offices where the computers suck out the unnecessary power. Instruct your employees to shut down their systems once they leave and turn off the overhead lights before leaving. But the least they can do is instruct the cleaning staff to do the same once they go.
Within the restaurants, turn off the appliances that are not for storage or safety. For example: once the restaurant is closed, turn off the ovens, not the freezers.
6. Promote Telecommunication
Telecommunication has proven itself to be one of the most effective cost-cutting measures during the pandemic. Not only this, telecommunication allowances have notably boosted employee’s morale and job satisfaction. Combination of the two resulted in better productivity.
Telecommunication impacts the final product of the companies and employees by:
Saving on the utility costs by saving on the electricity and water usage.
Cutting costs on the space required to accommodate employees in the central location—for example, using collaborative workstations for employees to work from home.
Saving on the communication and traveling costs on employees.
7. Buy second-hand pieces of equipment
Ask yourself if it is necessary to buy new equipment or use second hands with a long shelf life?
According to your business, your types of equipment might include:
- Office appliances like printers and copiers.
- Personal technologies like smartphones, tablets, and laptops.
- Transportations like delivery vans and company cars
- Liquid vats and bins for storage.
- Cutleries and utensils
- Furnishing materials.
Centuries ago, the worldwide economy survived on the barter system. Instead of paying cash, people would go around and exchange their goods. These days people use a currency-backed up system that doesn’t turn the whole economy entirely deprived of nonmonetary transactions.
The emerging digital innovations have promoted cottage industry facilitators like Barter Business Unlimited. There is a limitation on how and what you can barter, but you must try the arrangements as a cost-cutting measure.
9. Bargain with Vendors
Just like you, your vendors are also dealing with a ruthless economy. But that doesn’t mean they have to be the last word over what you will pay them. Try to negotiate with your vendors, and once you are successful, you will notice a considerable reduction in your expenses. The vendors find it better to deal on lower rates than losing their customers to some amount. This is worth trying as you can save hundreds of dollars.
10. Go Green
Going eco-friendly will not only improve your public relations but also help you cut costs. It is as simple as turning off lights when not in use, reusing waste paper for scratch or notes, turning off technical equipment when you don’t need them for a while, and so on. The primary purpose of this go-green movement is to save energy which you would waste otherwise. This will help your company to cut their costs and increase their profits.
11. Employ freshers
Not only can experienced people hike up your productivity if you hire intelligent freshers, but they might as well be able to provide you with a similar output at more than half of the experienced employee’s rates. Freshers might also be updated on the latest technology, and this factor will end up saving you a tonne of time and funds, which you otherwise would have invested in their training.
12. Cut costs on your meetings
Try to keep your meeting as short as possible. On-site meetings can be expensive because of travel and hosting expenses. Not only this, even online sessions may cost you charges and salaries. Apart from this, whenever your employees are not working, it compromises your company’s output. Therefore it is advisable to keep your meetings short, precise, and less frequent.
And also, keep the headcount least, this will not hamper your company’s production.
13. Review All Your Expenses
Look at all the expenses you have made so far. Check your pattern and see if there is a way to cut costs? You cannot make changes in your financial design until you understand it.
Sometimes we all tend to make petty expenses and do not realize how much it costs us in total. Cutting those costs can save you hundreds of dollars.
14. Deal your past due to accounts more aggressively
As harsh as it sounds but it is essential to become a little more aggressive for your past due accounts. Call your client for their due payments and expose your urgency towards them. People tend to save money for themselves; some of your clients may not even intend to pay you back. You have to deal with such stubborn clients with more aggression.
15. Pay taxes on time
A sound financial reporting system can help you with your tax preparations and tax filing. Your bookkeeper must be well versed in the current tax laws and must act accordingly. They can help you file a tax return and save you on taxes too.
16. Suitable bookkeeping
These are some cost-cutting measures you can take for your small business, but one of the essential elements that set guidelines for these measures is your bookkeeping. You can have your bookkeeping either outsourced.
You must consider all the factors and see which one is the most suitable for your business:
- Cost: an outsourced bookkeeper is more likely to be cost-efficient than your in-house bookkeeper. You have to pay higher hourly rates to your in-house financial reporter than the one you are outsourcing.
- Hiring and training: you have to spend a lot of time and money on your in-house accountant’s movement, but an outsourced accountant, on the other hand, is already trained, and you do not have to worry about skills enhancement.
- Quality of work: if you compare the rate of production of the two, you will most probably find the outsourced better because your accounts are handled by a team of accounting professionals who are experts in their area of work.
- Security of your data: as concluded by studies, your in-house bookkeeper is most likely to commit fraud than your outsourced bookkeeper, so choose wisely.
- Software advancement: the outsourced bookkeeping services are most likely to have expertise in the advanced software, whereas your in-house bookkeeper will have to work with whatever software you can afford; it could be outdated software too.
- Accuracy: outsourced bookkeeping is more prone to the accuracy of your reports than your in-house bookkeeper, as your financial data is shared with a team of accounting experts. And your information is most likely to get double-checked there.
- Availability: the outsourced accounting experts are more likely to provide you with 24/7 availability as a team of experts administers it. At the same time, your in-house bookkeeper can not avail you the same as they have a time limit to work for you. Once their time is over, you are left all by yourself.
- Productivity: considering the factors mentioned above, it is evident that outsourced bookkeepers provide better productivity than your in-house staff. A team of experts is responsible for generating your financial reports.
We hope we could provide you some relevant ideas to cut your business cost. These measures are constructive for small businesses. If you do not find any of the above solutions helpful, you can use an expert’s word. If done the right way, Cost-cutting can increase your revenue generation. Eco-friendly cost-cutting measures are especially advisable for a better public relation and saving on overall expenses.