Sources show that 82% of small businesses fail due to cash flow problems. Money problems are mainly caused by poor planning, overwhelming expenses, and low revenue.
When it comes to small businesses, every penny counts. This means making any possible cuts on expenses and improving productivity wherever possible. It is often much easier to balance the books by lowering business spending than increasing income.
To keep your business thriving, here are five tips on how to drastically cut expenses.
1. Stick to a Business Budget
Careful budgeting is crucial in managing finances. Cutting down on expenses begins by planning the available resource and predicted revenue. This gives you a clear idea of how to spend the funds that you already have and prepare for the future.
A budget is only useful if followed precisely. Practice a high level of discipline and avoid deviating from the laid-out plan. This way, your expenses will remain predictable, and you can easily find areas to make cuts.
2. Digitize Your Business Operations
Use technology to your advantage. With inexpensive and convenient technologies like VoIP and cloud computing, you can drastically cut down on communication, labor, and time expenses. You could even have virtual offices such as Hoxton Mix, and outsource work and services at relatively low cost.
Entire departments or roles can be made redundant by simply automating mundane tasks such as virtual assistance, data management, and emailing.
3. Cut Down on Energy Consumption
The cost of energy keeps going up, and it amounts to a large portion of recurrent expenses. Find ways to reduce your power bill and bring your costs down. The cheapest way to do this is to go green.
Begin by installing solar panels to generate free electricity. You could also modify the building to consume less energy by improving natural lighting and replacing inefficient electrical systems. The initial cost of changing the energy infrastructure may be high, but it pays for itself in just a few years.
4. Ditch the Print Media
On average, an American office worker uses about 10,000 sheets of print paper every year. Now, multiply that with the average cost of paper and the numbers go way up. Sadly, most of this paper ends up in the shredder or the dump.
And that’s only looking at papers alone without the added cost of ink, printers, and other stationary supplies. Transition to a paperless work environment and make huge savings. Use digital documents on computers and smartphones instead of printed reports, receipts, invoices, and postal mail.
5. Maximize Employee Productivity
Use incentives to motivate your employees to be more productive. Introduce training, rewards, and performance evaluation schemes to boost the employees’ morale and increase productivity. Don’t waste labor expenses on an under-delivering workforce.
Try New Creative Ways on How to Drastically Cut Expenses
These five ways on how to drastically cut expenses should guide you to making significant savings on your business’s running costs.
However, don’t stop there. Find other ways to cut more expenses depending on your business model and operations. Identify any cots that the business could do without and cut them off or reduce them.
Keep in mind that decreasing expenses requires a certain level of commitment and flexibility to cope with the changes.
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