The prime motive of any business is to earn a profit and increase profitability with time, obtaining sustainable long-term growth. As a business owner, you might also have the same aim; but have you prepared a comprehensive plan for scaling your business in the coming years? Have you thought of several essential factors you must consider for cost reduction? If not, you might take more time to scale than it usually takes.
Cost-cutting is an integral part of your business growth plans because boosting sales and increasing your customer base cannot do it alone. In fact, many business owners begin with trimming expenses before hitting hard on profitability and expansion. So let’s start by discussing its importance.
The Utter Need for Cost Reduction in the Current Times
Recalling the last couple of years, a majority of businesses were hit by the global pandemic, and countries around the world faced economic uncertainty. You may also look back to the great recession of 2008, causing a global financial crisis. Though both events were different from each other in terms of causes and impacts, some things were common such as many businesses actually got over the crisis and performed pretty well.
Why? Because they found the right way and areas to cut costs and invest more wisely. They made a precise balance between high productivity and less expenditure.
Likewise, you can do the same; you need a comprehensive plan for cost reduction while scaling your business to new heights. However, you should also know that not all plans become successful.
Why Do Some Cost-Cutting Plans Don’t Work?
According to Gartner, less than 43% of business leaders obtain the level of savings according to their initial cost reduction plans. – source
Common reasons behind the failure are as follows;
- Lack of clarity during the strategizing phase
- Unrealistic budget plans
- Inaccurate financial records, leading to wrong planning
- And many more
Hence, if you want your company to become more efficient at achieving sustainable growth and scalability, you should prepare a strategy for controlling your expenditure. You need to build a roadmap; instead of planning things just in your mind, it is time to establish a solid foundation for your business. Doing that will help you succeed at cost-cutting, profitability increment, and higher growth and scalability.
Let’s now get further to discuss some of the key points that will help you prepare a sound cost-cutting plan.
5 Best Ways to Reduce Costs for Higher Scalability of Your Business
1- Get Your Accounting Books Right
In order to determine where you need not spend in the future, you must become aware of where you have been spending so far. And to make sure this information is accurate, you need to get your bookkeeping right. Your books speak it all, but if they have incorrect numbers, they will tell a lie depending upon which you might not be able to prepare a great plan.
Therefore, the first step is to ensure your books are accurate. For this, if you don’t have specialized bookkeepers, you may consider outsourcing virtual bookkeeping services. This will not only enhance your financial numbers’ accuracy due to being handled by experts but also save you money as these services will cost you considerably less than you would pay a full-time in-house bookkeeper.
2- Discuss with Employees – They Know It Well
You might agree that your employees actually understand the depths of their respective departments, where they are lacking, where they are overspending, and similar. Therefore, get some time to discuss the need to reduce your costs with employees across departments.
This will help you get a clear idea of whether cost-cutting is possible or not. Apart from that, you may also run a reward program for employees to encourage their active participation in helping you get higher productivity at lower costs.
3- Reconsider Delegation of Duties
It is common in many businesses to recruit unfit candidates, and then they struggle to replace them as it can take months. If you are in a similar situation or might face this challenge in the future, the best you can do is delegate them to where they fit best.
For example, if an employee is not doing well in the customer support department but is fast at reading and typing, you may consider giving them data entry roles. That way you can best utilize your workforce without looking for a replacement.
4- Explore the Scope of Freelancers for Your Business
Today, a large number of professionals are interested in working remotely, and many of them have actually left their job to work as freelancers, especially in the last couple of years. Getting remote workers on board can help you save hundreds of thousands of dollars otherwise spent on office space, power bills, IT infrastructure, stationery, etc.
Moreover, according to Forbes, “remote workers are generally more productive than employees who work in an office setting.” So now you can evaluate how much you can save while pulling out more efficiency and productivity, enabling you to achieve fast and higher scalability.
5- Include Outsourcing in Your Strategic Planning
The outsourcing model has changed the game for many businesses in the past, and it is only getting more popular with the passage of time. In fact, back then, companies used to outsource for the core purpose of cost-cutting. Take a look at these exciting stats;
- The US alone outsources around 300,000 jobs each year
- Cost reduction is the top (70%) reason for outsourcing
Nowadays, outsourcing is not only saving firms money but also delivering unmatched talent to boost their clients’ expansion efforts. Let’s take an excellent example – say if you outsource accounting services, you can rest assured that the entire process is well-managed and optimized by skilled and experienced accountants with complete security and transparency, allowing you complete control of your finances. Outsourcing services are cost-effective and have proven to be highly beneficial over time.
The Final Words
Beyond these, there can be many more ways you can reduce your overhead to empower your scaling effort. However, the key is in the measurement; if you cannot measure precisely where your cash is going, you would be unaware of how you can save it. You can start with as simple as periodically checking your processed invoices; many times, businesses lose money due to incorrect invoice details or making a payment twice and similar.
While many companies consider the year-end the best time to evaluate their financial position and performance to plan cost reduction and budgets, know that the sooner you start, the better.
Stacey Howard has 6 years of experience in accounting. She has been working as an accountant with reputable firm Cogneesol– accounting and tax preparation service provider. She has a unique way of networking through her words across the globe. Her writings shine through various forums that speak about her profession. She is the proper interpretation of an accounting profession-driven passion for writing.
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