While most entrepreneurs focus on increasing sales, lowering expenses is equally important when trying to achieve or maintain profitability.
Cutting these costs is as effective as cutting the direct variable costs of labor and materials. Figuring out how to reduce or eliminate specific administrative costs is essential to the profitability and long-term success of your company. Trimming these expenses will decrease the revenues necessary to break even or make a profit, provide greater flexibility in long-term pricing strategy, and improve cash flow.
How to Cut Administrative Expenses 1.
Ownership or long-term leases increase your fixed costs and financial exposure. While month-to-month rental agreements tend to cost a little more in the short-term, the ability to end the agreement and relocate to a more suitable space saves money and liability in the long run.
Limit Travel and Entertainment Expenses Client relations is always important and should never be compromised. Establish an entertainment policy which fits the economy; your clients and prospects will understand since their company is probably implementing similar policies.
Telecommute Technology effectively reduces distance, so there is no need to require administrative people or specialists to be physically located together. Employees who work from home or in month-to-month temporary facilities reduce or eliminate the high cost of office space, as well as the demand for support services.
In many cases, employees with the opportunity to telecommute will take less salary due to the freedom and lack of commuting costs. Sublease Office and Yard If you have excess space that will not be used for a year or more, investigate subleasing.
Before agreeing to a sublet, you should be confident that the space will not be needed during the term of the agreement. Include language in the contract for early termination if it becomes necessary.
Refinance Debt Interest rates are unusually low at this time. If you have any long-term debt on equipment, machinery, or real estate, now is the time to refinance with the goal of reducing payments as much as possible for the near term.
In hard times, cash is kingso you want to keep as much as possible close at hand for emergencies. Eliminate Subscriptions and Memberships Over time, many companies add subscriptions and memberships due to their industry and the small expense involved for a single affiliation.
These expenses can rapidly build up and go unnoticed, however, as they often appear on different schedules and expense reports.
Review all your social, fraternal, and business affiliations to ensure they are necessary and contribute regularly to the profitable operation of your company. Eliminate those which do not. Cut Travel Costs Where possible, eliminate travel, replacing the trips with phone calls, emails, and video meetings.
Increase the scrutiny of your expense accounts to send a clear message to your staff that costs are important. When you travel, stay in business hotelsrather than luxury hotels, as they are often half the cost of a four-star facility.
And everyone who travels should be members of the affinity group sponsored by that hotel to gain discounts and free nights. If staying in a larger city, consider the use of taxis instead of renting a car.
Eliminate Paper Managing paper is time-consuming and expensive. Purchase a scanner and digitize all important papers and keep them in well-organized electronic files to save space and administrative costs.
Share Marketing Expenses Identify products or services which complement your product. Then, contact the company that provides the products and negotiate a mutual marketing arrangement. This strategy expands your marketing effort without incurring the expense that would normally be associated with adding new salesmen or advertising.
Maintain Equipment In-House If repair and maintenance is a significant cost in your operations, consider hiring a mechanic or specialist and bring the repair in-house.
You will have better, regularly maintained equipment that may allow you to avoid expensive replacements until later.Many people look at entertainment as the first thing to cut when trying to trim costs, but they often forget to look at the regular expenditures that slowly eat away at your financial foundation month in and month out.
Plan for your future; Mortgage Rates; Auto Loans; Personal Loans; Consolidation Loans; Student Loans; The Simple Dollar. Cutting costs is arguably the quickest and easiest way to improve the profitability of your business.
Introducing a cost-control system can bring immediate savings and ensure that you remain competitive in the longer term. How to reduce costs. Cash flow, planning and tax Categories.
Starting a business;. Cutting costs is arguably the quickest and easiest way to improve the profitability of your business. Introducing a cost-control system can bring immediate savings .
Feb 15, · Here are 5 ways to control costs. 1) Naturally these discussions primarily should focus on ways to grow the business. But too often these discussions fail to address costs. or how to plan.
April 04, You don’t have to go into debt or compromise quality or performance to cut business kaja-net.com are significant ways to save money without compromise. Cutting costs was essential, but the retailer feared driving sales even lower if it cut in the wrong places.
It began by working out which activities were essential for a distinctive retail experience and which would be most easily damaged by cost cutting.