15 Most Effective Ways To Cut Back On Your Small Business Expenses:
- Entertainment expenses
- Transport and traveling expenses
- 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
Business expenses represent money spent in the process of carrying out your business activities.
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.
By the nature of money, if you do not spend it, it will remain where you kept it.
Therefore, there is every need for you to put in place fool-proof measures to track your expenses.
This article is, therefore, focusing on areas of your business where you can:
- reduce some expenses
- do away with wasteful expenses
- make savings
- grow your business
Cut back on business expenses: Entertainment Expenses
Entertainment expenses, if not controlled, can hurt your business before you know it.
A moderate entertainment expenses incurred in order to show a major customer that you appreciate his business is OK.
However, the same cannot be said of spending large amounts of money to entertain family, friends and associates who do not add value to your business.
After all, there is no need to make profits with the right hand and lose the money with the left hand.
Transport and traveling expenses
You can reduce transport and traveling expenses.
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 give your friend something to encourage him.
Most importantly, only reasonable expenses should be incurred.
Cut back on 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, you can sublet part of the office or shop to anyone who may need it.
Thus, the rent you will receive from the apartment you sublet will help to reduce expenses on rent.
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 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 make mistakes, discard and trash documents, these will increase your business expenses.
Workshops and seminars
Yes, you may have occasions to attend business seminars, workshops or conferences relating to your business.
However, you should not jump at every invitation without considering the cost and the benefits.
In other words, you should honor only that that promise positive impact on your business.
Most importantly, if you must attend, you can pair up with a friend instead of occupying one room in a hotel.
This will ultimately save you some money 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.
Cut back on business expenses: Salaries and Wages
In many businesses, it salaries and wages of employees that bloat business expenses.
It is true that you need employees that will carry out various tasks needed to keep the business running.
However, it sometimes happen that because of family ties you retain employees who are not productive
In this case, you can take any of a combination of the following options:
- Offload employees who are unproductive,
- Questionable characters
- Unwillingness to learn
- And employees who have nothing to offer the company now or in the future.
For those who show show signs that they are willing to learn, you can send them for further training.
Most importantly, employees who are most unlikely to develop themselves can be shown the way out.
In business only the best is good for you.
Cut back on business expenses: Interest on loans
Interest on borrowed money can hurt your business.
Apart from the high interest rates, if you default, the interest on the loan will calculated on compound interest.
Therefore, if you must borrow a you should ensure that you borrow the amount that you can pay back as soon as you possible.
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 idle plants or equipment that you spend tons of money to maintain, you can sell them off.
Alternatively, if your business still needs them, you can trade them in for new ones.
Adverts and publicity
Adverts cost money. But they are needed to drive sales.
However, you should take out only ads that are properly targeted at the right audience and at the right time.
Ineffective ads will only increase your small business expenses without getting you the desired results.
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.
Furthermore, you can monitor the use of fans and air conditioners in your shop or office.
Cut back on business expenses: Legal expenses
Another way you track your expenses is to make sure that you comply with all extant laws that relate to your business.
For example, if you operate your business outside the confines of the law, you can be sanctioned
Furthermore, if you enter into contractual agreement with your business partners and you default, legal action can be taken against you.
Therefore, you should make sure that you are always on the right track.
Avoid interdepartmental conflicts
Maybe your company may have several departments.
It is is your responsibility to ensure that your employees are working in harmony.
For example, if machines have to stop running because of departmental conflicts, you will be paying for idle time.
Involve your employees in cost control processes
Next, you should involve your employees:
- in decision making
- team building
- problem solving
- Train them on relevant skills
- Involve your employees in cost management processes.
- Invest 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 getting things done.
This is because when employees are involved in the cost control process, they are better able to manage business expenses.
Cut back on business expenses: Easy Savings
You can save money on by reviewing the following expenses:
- source for better suppliers
- Reduce expenses on telephone,
- Avoid unnecessary subscriptions.
- Check supplier invoices carefully for overcharging, wrong calculations
- You should not carry excessive amount of stocks
- Avoid excessive carrying costs for stocks
- Place orders for exactly what your customers need.
- Avoid invitations that will not add value to your business.
Cut back on your Fixed Expenses
Cut back on fixed expenses:
- Negotiate with your landlord for a reduction in your rental charges
- If possible, sublet part of your store to another trader
- Buy only the assets that your business use
- Sell off any assets your business has not used in the last six months
You do not need to sit down, fold your hands and allow unnecessary 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
B. Sc Accounting (University of Berlin)
Benin City, Nigeria.