Reducing business expenses seems fairly straightforward: root out excessive and unnecessary expenses, prohibit unapproved spending, and carefully consider alternative options before making a large purchase. In most cases, these actions will reduce expenses, but it’s not enough.
Reducing business costs also requires rethinking priorities. When priorities don’t fully support your business, it’s easy to perceive unnecessary expenses as being necessary. For instance, when your priority is to stay up-to-date with the latest technology, having the fastest servers and getting the latest tech gadgets in the office seem like necessary expenses.
However, when your priority shifts to efficiency, suddenly you don’t need the fastest servers to meet your needs and tech gadgets are more of a luxury.
Are you working to reduce business costs? Start by revisiting your priorities
Before you start looking for expenses to cut and services to downgrade, revisit your business priorities so you can view your expenses through the right lens. If you try to cut costs before reassessing priorities, you may end up cutting costs in the wrong places and bypassing costs that really should be reduced or eliminated.
If your priority is quality, it doesn’t make sense to cut costs by changing production methods and materials in a way that produces a lower quality product. However, if your product won’t be affected by a slight downgrade in materials, then it does make sense to cut production costs by lowering the quality.
Reassess priorities in each area where money is spent
What are your priorities in each area of your business and what are the minimum tools needed to accomplish your goals to your specific standards?
For instance, say you have a complex digital marketing plan that requires top-of-the-line CRM software like Infusionsoft. However, you’re not yet at the point where you need complex features. It will take you at least another three months to solidify your email marketing plan, meanwhile, all you need is a program that collects emails.
In that situation, it makes sense not to buy a subscription to Infusionsoft until you need those complex features. When the time comes, you’ll need to import your email list and work hard to switch over to a new program, but it will cost you far less in payroll than hanging onto an expensive, unused subscription for several months.
Reassessing the need for subscription software is just one of many money-saving opportunities. If you look hard enough, you’ll find plenty of areas to cut costs.
Attitude is everything – do you have a cost-saving mindset?
When you need to cut costs, there are two attitudes that can work against you.
A “just get it done” attitude can be expensive
There’s nothing wrong with just getting things done, but some situations require in-depth examination. For instance, you can save time and money by quickly paying all of your bills that come in, but what if some of your vendors are overcharging you? If you don’t take the time to sit down and look over every charge on your invoices, you’re likely paying more than you owe.
Unfortunately, 95% of companies overpay invoices. There could be bogus charges on everything including your electric bills, water bills, and internet bills.
Sometimes vendors add bogus charges accidentally, and sometimes it’s intentional. If you don’t have the time or personnel to scrutinize your invoices, you can hire a cost analyst to do the work for you. A cost analyst will audit your invoice charges to make sure you’re not being overcharged.
When your goal is to cut costs, you can’t afford to blindly pay your invoices.
Not wanting to ‘haggle’ or argue with vendors can cost you a fortune
Not wanting to haggle with vendors over errant charges seems like the perfect way to avoid stress, but it can also cost you a fortune. If you notice bogus charges, questionable line items, or anything that isn’t clear on an invoice, it’s your duty to speak up and ask for clarification. Sometimes items are easily explained, but if not, you need to call it out.
You might be included in the large number of people who hate haggling for fair prices, but when it comes to business invoices, you’re not exactly trying to get a better deal on a rental car. When you discuss an inflated invoice with a vendor, you’re holding them to account for their end of an agreement. There is no reason you should have to pay more than you agreed on, unless the charges were legitimately earned.
Reassess your priorities, then cut costs
Once you determine your priorities, then you can hunt for ways to cut costs. Expenses that don’t support your priorities should be easy to identify and reduce and/or eliminate. If you’re not sure where to start, hire an expert cost analyst to do the work for you.
Interesting related article: “What does Cost mean?“