Reducing costs in your business can be a huge advantage for you in the long term, especially if you are thinking about making larger investments and improving how your business functions financially.
Managing finances in your business should be a priority for you and allow you to make smarter decisions whenever you decide to do new things for your business. Especially when you keep your costs low, there is potential to do more things for your business.
In this article, we will find out the top ways you can manage to reduce your business expenses and keep them at the lowest point possible.
10 ways to reduce business expenses
1. Stay updated with technology
Technology gives us a chance to save money and use that money to invest in more important things that we once didn’t find possible to do a decade ago. There are numerous ways to reduce your business costs, from new software to online payment services, remote applications, and much more.
For example, recently, AI has been evolving at a high rate, making it easier for businesses to reduce expenses. Moreover, according to a study, AI can complete more complicated labor-intensive tasks than human beings. Thus, this helps you reduce overhead costs since you won’t need to hire many people to complete the task. Nevertheless, the AI will help you ensure that the quality is much better than it would be from a human being.
2. Become environmental-friendly
You’ve heard complaints about the environment before and how bad climate change is getting. However, going green won’t do any harm to you. For instance, whenever you have a home-based office, the more energy-efficient you are, the lower your utility costs.
LED lights will be a much more energy-efficient option than regular light bulbs. According to statistics, you’ll be saving anywhere between $10 to $20 for every five hours that a LED light is used.
Additionally, even if your team travels a lot, you can choose environmental-friendly transportation methods. Many business travelers will consider using TripActions. However, TripActions competitors offer environment-friendly alternatives as well. Some options you can consider using are:
- CWT, and more
3. Open a business financial account
Freelancers and small businesses can set up a line between their business and personal finances. For example, you don’t want to start digging for business expenses amongst your clothing purchases when the tax time comes.
Start to open a business financial account to precise your business-related expenses. You can start to use business accounts for all types of business purchases. Having a financial tracker will help simplify the process by organizing and managing your finances, which allows you to focus more on other important things within your business.
In order to do this, you’ll need to open the following:
- Open a business savings account
- Have a business credit card
- Open up a business chequing account
There are credit cards that will offer you cashback purchases. Others will allow you to collect and redeem points for hotels and flights. For example, Forbes gives you a list of the best business credit cards.
Overall, Entrepreneur.com recommends you avoid using cash whenever possible. It’s too easy to spend and difficult to track, unlike digital transactions, which have a record in your bank statement and a receipt. It’s a much better alternative for your business, your taxes, and much better if you use credit and debit cards to make purchases.
Use a spreadsheet
Whenever you open a business financial account, your best bet is to use a spreadsheet. This option is an excellent choice if you are thinking of using a low-tech approach for managing and tracking your expenses or even if you are a beginner in your industry.
Creating your spreadsheet from scratch means that you manually need to keep track of expenses you make throughout the day instead of having an automatic expense tracker.
Create your categories and sort them out into specific columns. If you have access to Google Sheets or Microsoft Excel, it shouldn’t be challenging. Overall, spreadsheets are easy to import into your accounting software, and most of them are compatible with Excel and Google Sheets.
Create a spreadsheet in Excel with the following columns:
- Date, and more
Important categories you can use are our marketing, office supplies, travel expenses, and more.
4. Go paperless
Especially since we live in the digital world, the amount of paper we need to use is less required. However, In the long-term, paper, postage, mailing supplies, and ink can add to your overall business expenses. Therefore, the best method is to avoid using paper unless you have to print something important out.
Transitioning to digital invoices and online billing is a much more efficient option, where you can fill in all the important paperwork on your computer instead of having to stack a bunch of paper in a file cabinet; that will help you reduce business costs by eliminating the need to buy additional paper.
5. Use cloud computing
Every business startup will be using software for important things such as accounting, bookkeeping, presentations, and word processing. You can find an open-source software or a cloud version for the most important things you’ll need to do. It isn’t necessary to always buy expensive software and use servers that allow you to switch to a cloud vendor. Google is an open solution for most problems you have!
6. Reduce your credit card debt
Reducing your business costs may be easier than you may think, bypassing everything onto your business credit card. However, interest rates and other fees can add up, so this is not an effective way of reducing business costs in the long term.
Reducing credit card debt isn’t an easy way to reduce your business costs, but it’s a smart way to make your business financially healthy in the long term. So, think twice before using a credit card to pay off your business expenses!
7. Retain top employees
High-performing employees, especially those who are an asset to your company, are considered valuable assets. Not just that, but valuable relationships within the company contribute to long-term benefits.
Bad hires can do some damage to your business. In fact, according to statistics, a bad hire will cost you 30% of the employee’s first year’s annual earnings. So, always pay attention to who you hire and try to retain your best employees. Making additional hires will result in higher costs and only make your job more difficult; let’s not forget about the much higher expenses you’ll need to undergo when making bad hires.
8. Go remotely as much as you can
Many businesses are starting to go remotely, and the best part about it is that you are cutting back on many office and equipment expenses. 16% of companies worldwide are currently working entirely remotely, and many other ones include a hybrid schedule. Imagine when you go to an office, you have to pay for many things such as rent, office equipment, drinks, food, and many more things. However, working from home is an entirely different story when everyone is working from home.
9. Try setting up partnerships
When you purchase equipment, have to fix something at the office, or use software, setting up a partnership with your clients isn’t bad. It can help reduce business costs and only add to your long-term benefits. Clients you choose to work with will try to give you long-term offers that will help you reduce costs.
Maybe this may include signing a one-year or long-term contract that you’ll buy software or equipment from that particular client. Then, instead of buying for the regular price, you’ll have bonuses involved that may include more material, a small discount, or something more.
10. Consider buying used equipment
Used equipment may be just as good as buying new equipment. Especially nowadays, you have many online options and can easily place an online order to purchase used materials. Some of the best-used equipment can be found on eBay, Amazon, Craigslist, and many more alternative options.
The final word
That’s all for this article. These are the ten ways you can successfully keep your business expenses low. Of course, maintaining business expenses low might be pretty challenging from time to time. Still, it’s a requirement because having large expenses may harm you in the long term, especially if you are going through difficult times in your business.
Let’s not forget how important it is to use accounting software and write down your expenses. Expenses become challenging to manage whenever you see that you aren’t writing them down.
Write your expenses down, use the proper software, try to go remotely if it’s possible in your industry, and even consider buying used equipment on popular sites like eBay and Amazon. Otherwise, you should do great and have the most effective year managing business expenses!