15 Most Effective Ways To Reduce Your Business Expenses

The following are 15 Most Effective Ways To Reduce Your Business Expenses

  • Entertainment expenses
  • Transport and traveling expenses
  • Rents
  • Printing and stationery
  • Workshops and seminars
  • Wages and salaries
  • Interest on loans
  • Maintenance of plants and machinery
  • Adverts and publicity
  • Power consumption
  • Legal expenses
  • reduce inter-departmental conflicts
  • Involve your employees in cost control processes
  • Business Expenses: Easy Savings
  • Review your finances

There is no doubt that huge business expenses can hurt your small business. In fact it is one of the  commonest causes of business failure.

Moreover, it is common knowledge that business expenses reduce profits.

Furthermore, reduction of business expenses does not just happen.

To enable it happen, you need to make changes here and there  in all areas of your business.

While some business expenses can be controlled, others cannot.

However, you cannot just fold your hands and allow all sorts of expenses eat to deep into your hard earned revenue.

In this article, therefore, attempt is being made to  take a hard look at some of your business expenses with a view to identifying those expense items that can be pruned down or even avoided altogether. Let us go!

Entertainment Expenses

Often times, you will find yourself spending money to entertain customers, family and friends.

The expenses you incur to entertain important customers are justifiable because you are using such expenses to sustain a business relationship.

However, such entertainment expenses on customers, suppliers and others must be within tolerate limits.

However, the expenses you make to entertain family members and friends out of your business revenue are losses. They reduce your profits at the end of the year.

But if you must spend money to entertain family members and friends, such expenses should be made from your personal account.

In other words, you should not mix your personal expenses with your business expenses.

Transport and traveling expenses

This is an area where you can save some money.

For example, if your business involves traveling regularly, you can save money by squatting with a friend who leaves where are going instead of lodging in a hotel.

Furthermore, if your business is located far from your home, and you have a friend whose business or office is located close to your business, you can carpool to reduce your business expenses.

In this case, however, courtesy demands that you should occasionally help your friend out with some money for fuel. That will be cool for both of you.

Business Expenses :Rents

Yet another area where you can reduce business expenses is rent for your office or shop.

For instance, if you are occupying a large office or shop space with very little merchandise, it

will make sense for you to sublet part of the office or shop to anyone who may need it.

This way your rental payment will be reduced.

Therefore, there is no need for you to carry huge rent burden.

Printing and stationery

Printing of documents and stationery is yet another area where you can reduce business expenses.

For example, if you employ a secretary who is incompetent who has to type one documents over and over again before producing a fair copy, you will be wasting money on stationery.

In the same vein, if you have a bunch of incompetent officers who discard or trash documents at random, you will be increase your small business expenses on stationery.

If you have a budget for stationery and your employees are wasting papers, you will be surprised to see that your expenses on stationery will hit the roof of your budget for stationery.

Workshops and seminars

Yes, you may have occasions to attend business seminars, workshops or conferences that might benefit your business.

However, you should not jump at every offer of seminar, workshop or conferences.

You should be able filter such offers and go for those that will have beneficial impacts on your business.

Furthermore, where possible, you can squat with a friend if you have one in the city where the event is taking place.

If that is not possible you can share a hotel room with one of the participants.

This will reduce your small business expenses and improve your bottom line.

After all, you are not going there for a jamboree.

You are only going there to improve your knowledge, training and experience.

Salaries and Wages

In many businesses, salaries and wages of employees form a substantial part of total business expenses.

It is true that you need employees to carry out the various tasks needed to keep your business running smoothly.

However, it is not unusual to see cases where you will have unproductive employees on your payroll.

In this case, you have many options, including the following:

  • off-load employees who are unproductive
  • employees who are inefficient
  • employees who have questionable characters
  • employees who do not show willingness to learn
  • employees have nothing to offer to your company.

However, if you can send them for training to make them more useful, you are free to do so.

If on the other hand, they are people who are most unlikely to develop themselves, you can show them the door. This will, thus, reduce your business expenses.

Business Expenses :Interest on loans

If in the course of managing your small business, you borrow money from bank, you should endeavor to repay the loan and the interest thereon.

If you fail to repay the loan as agreed, the interest on the loan could be calculated on compound interfere with yst rate.

Therefore, if you default in your Loan, the interest charges, whether on simple or compound interest rates, increases your business expenses.

Maintenance of plants, machinery and motor vehicles 

To enable you to manage your small business successfully, you should not keep assets that are sucking your cash.

For example, if you are keeping unproductive plants on which you are spending lots of money, your business expenses will increase without any corresponding benefits to your business.

Similarly, if you have old vehicles that are putting holes in your pockets, your business expenses will increase.

Therefore, you can sell the assets in question or trade them in for new ones.

Adverts and publicity

To ensure that you manage your small business successfully, you should only take out adverts that are properly targeted at the right audience.

Ineffective ads will only increase your small business expenses without getting you the desired results.

Power consumption

You can significantly reduce your small business expenses by controlling how power is used in your small business.

For example, you should be able to determine which lights should or should not be put on during the day in your small business.

Legal expenses

Many businesses are highly regulated by government agencies. For example, before you can set up a gas plant or petrol filling station, you need to obtain the necessary approvals and licences.

Moreover you need to comply with all the regulatory policies required by he relevant government agencies.

In addition to that, if you take loans and you are unable to repay the loan and the interest, the balance on that loan account can be calculated on compound interest basis.

Furthermore, if you enter into contractual agreement with your business partners and you default, the consequence could be court legal action against you.

Consequently any money you spend to get your business out of the hook increase your expenses without a corresponding benefit to your business.

Therefore, for you to manage your small business successfully, you need to make sure that you are on the safe side of the law and government rules and regulations.

Reduce inter-departmental conflicts

Usually your company may have several departments.

It is is your responsibility to ensure that you harmonize the activities of all the departments.

This is necessary because if there are conflicts in the way department relate with another department, you might suffer your losses. i.e. your expenses could increase without corresponding benefits.

Therefore, you should be constantly questioning how work is done. And find out if there are better and more efficient ways of doing the jobs.

Involve your employees in cost control processes

Next, you should involve your employees

  • in decision making
  • team-building and problem solving
  • Train and skill them
  • Involve your employees in the expense management process,
  • Invests in your employees
  • Look out for suggestions from your employees to find out if any of them has good ideas that could lead to cheaper and more efficient ways of doing things.

This is because when employees  are involved in the cost control process, they are better able to manage business expenses.

Business Expenses: Easy Savings

Some small business expenses can be reduced with little or no negative effects on the quality of your products or service.

  • Check supplier invoices carefully for overcharging e.g. missing discounts.
  • Get rid of obvious overcapacity e.g. paying rental on spare telephone lines, unnecessary subscriptions etc.
  • Source cheaper suppliers who will still offer you the same level of service and products.
  • Negotiate lower business expenses
  • Some small business expenses can be reduced with little or no negative effects on the quality of your products or service.
  • Check supplier invoices carefully for overcharging e.g. missing discounts.
  • Get rid of obvious overcapacity e.g. paying rental on spare telephone lines, unnecessary subscriptions etc.
  • Source cheaper suppliers who will still offer you the same level of service and products.
  • Negotiate lower business expenses
  • You should not  carry excessive amount of inventory/stocks because the manufacturer has lowered the price to get rid of them.

Cut back on your Fixed Expenses

 Cut back on fixed expenses:

  • just-in-time purchasing,
  • better credit control
  • and agreeing longer payment terms with your suppliers.
  • Consider low interest loans rather than overdrafts
  • Get the most out of your premises by thinking about sub-letting any extra space.
  • Check out to see if you can reduce your utility costs and also check out alternative telecoms suppliers.

Related :13 Most Effective Ways To Increase Profits In Your Small Business

There are several other areas  of your business where you can reduce business expenses, especially those that do not add value to your business.

You  do not need to seat down, fold your hands and watch avoidable expenses wreck havoc on your hard earned revenue.

Therefore, you should always track your business expenses to make sure that you get value for every single Naira/dollar that leaves your business.

 

By Samuel Ijenhi

info@samuelijenhi.com.ng

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