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Tuesday, June 24, 2014

Five ways to cut your business overhead expenses

By Wendy Lin

One of the great challenges of running a business is balancing the books. And in such difficult economic weather this is harder than ever. Yet the companies that succeed have found ways to reduce their expenditure by managing their costs. So read on for ten great ways to cut your essential business running costs.

IT costs

Reduce business overhead expenses
Cost management is essential for lean business operations
Businesses are increasingly turning to cloud based IT services to reduce the cost of hardware, software and IT support, and research shows that 80% of businesses have saved money by switching to cloud computing.

Using the cloud enables you to pay only for those services you need, and so reduce expenditure on essential IT costs such as server maintenance, in-house IT support services, software and processing power.

And not only does it deliver financial benefits, the ability to work collaboratively through online platforms increases employee flexibility to work from home. So you can also make savings on your energy usage, with the added potential to save on staff costs by outsourcing work.

Office space and building costs

Is your building serving you well? In most cases, companies aren’t utilising the space they have, resulting in wasted rental and rates costs. Either renegotiate the lease, downsize, or investigate the possibility of office share. This can work especially well with collaborative creative industries. Alternatively, for an extremely radical approach, do you need an office at all? Technology now allows for the possibility of remote working without any need for a base.

Employee costs

Cutting employees can be a false economy, as it results in decreased productivity. Instead, if you’re struggling with wage costs, think about reducing hours instead or withdrawing expensive perks such as free lunches. When hiring, don’t employ the most experienced candidates you can find. Experience demands higher wages, so find talented people who lack experience and take the time to train them instead.

Energy costs

Energy represents one of your largest overheads, so do all you can to reduce the cost. 50% of most businesses energy expenditure goes on heating, and 25% on lighting, so these should be your priorities. Only heat those areas of a building that you use, regularly service and maintain your heating equipment, and turn the thermostat down. For savings in your lighting, invest in energy efficient LED or CFL lighting which uses only a fraction of the energy used by traditional incandescent lamps. http://www.plannedlighting.co.uk recommends approaching a lighting company in the first instance for an energy audit. This will set out the costs savings and ROI that upgrading your lighting will produce. There are also a number of finance schemes available to help with investment costs.

Collaborative marketing

Marketing on social media costs nothing, but if your business also relies on old fashioned marketing in newspapers and magazines, then consider sharing the cost with a complementary firm. For example, a building supplies company could team up with a conservatory company to create an advert that promotes both firms, enabling you to share the cost.

About the author: Wendy Lin is a writer, painter and successful businesswoman. She enjoys consulting businesses on their accounts and is passionate about helping businesses succeed.

Image: Jorge Franganillo, CC BY 2.0
"Drowning by numbers"