15 Cost-Cutting Techniques For Small Businesses

15 Cost-Cutting Techniques For Small Businesses

If you run a small business, you might be facing a hard time recovering from the financial hit caused due to the coronavirus. However, this is also an excellent opportunity to step back, analyze your finances and figure out strategic ways to reduce your business expenses.

Almost half of new businesses fail within the first five years, and most of it is due to poor financial planning. You can ensure your business stays afloat by implementing these simple yet effective cost-cutting techniques for small businesses.

Track every single expense

To manage your expenses, you need to know precisely where every bit of your dollar is going. If you track your expenses currently, that’s great. If you haven’t started yet, it’s not too late to start now.

Having a remote bookkeeping assistant on your team to manage the same will be a great help to your remote business. They are more affordable than a traditional accountant and will help you manage your expenses down to the last penny so that you know where all your money is going.

Credit: Unsplash.

Many companies incur everyday expenses that they don’t keep track of, such as Casual Friday pizzas every week or birthday cakes and parties every month. Though these might seem like small expenses, they tend to pile up over the months. It’s essential to know how much money is going towards these unpredictable, additional expenses to find ways to reduce them.

Using an online payment solution might help you track how much money is going towards these unpredictable, additional expenses to find ways to reduce them. By introducing a white label payment gateway, financial companies can avoid unnecessary costs and optimize and scale their payment operations.

Eliminate Unnecessary Expenses

Unknowingly, companies go through expenses that are not required in the first place. For example, a small marketing firm in LA found out that they were spending a considerable amount every month for a newspaper subscription that they didn’t even use. Over time, this amount resulted in a substantial but unnecessary expense for the firm.

Likewise, review your budget down to the minutest details by using an expense policy builder,  and ensure that every penny you spend goes towards something beneficial for your business.

Switch to Cloud Computing

Almost every company, big or small, uses software in their day-to-day operations, whether for communication, accounting, or presentations. But, unfortunately, these software or apps cost a lot of money.

Do your research and find the best free/affordable cloud computing software that makes operations easy without putting a dent in your budget. Now that the future of work is heading in a remote direction, cloud tools are more relevant than ever. Check out this list of helpful cloud tools to help you run your business more efficiently.

Collaborate with Other Brands for Events

At one point or another, you will need to host an event to promote your brand, launch a new product or just get press coverage. These events while immensely beneficial can be pretty expensive to host.

The best way to reduce expenses while conducting events is to collaborate with other brands as sponsors or event partners. The money saved, will help you put out an event of better quality, which is always good for your business.

Outsource your Work

If we have to pick out one positive outcome from the coronavirus pandemic, it is the fact that it created many remote workforce opportunities. That is beneficial for both employees and business owners.

Employees can work remotely from the comfort of their homes, while business owners can outsource their work to freelancers and agencies for a fraction of the cost of a regular full-time employee without compromising on the quality of work.

It is critical to clearly calculate the labor cost percentage also for well-knowing whether the pricing is set accurately or not.

There are countless online tools that help with managing remote teams these days which make a manager's life easy.

Virtual assistants are a great asset in helping businesses, and are pretty affordable too, especially if you are a small business. Some of the areas where hiring remote employees and virtual assistants can support your business are - administrative tasks, bookkeeping, social media, content writing, and data entry.

Create a Financial Budget

Creating some financial boundaries for your business can help you keep your expenses in check. Analyze your expenses, build a sales forecast based on your expense patterns, and set a budget accordingly.

If possible, do sit down with your accountant or bookkeeper once a month regarding finances. That will help you check whether you are on track with the budget you set for the business at the beginning of the year. Regular reviews are the only way to monitor if you are making any progress towards reducing business expenses.

Prioritize Hiring and Upskilling

A business is nothing without a solid team to help it grow. Yet, business owners often tend to hire people who agree for the lowest pay and later wonder why the output does not match their expectations.

Quality employees don’t come cheap, but they are always worth the extra money. In addition, if an employee feels happy in the workplace, they are less likely to leave, and you then don’t have to incur extra expenses of hiring new people.

Similarly, instead of constantly hiring new people for various tasks, invest in upskilling existing employees. Regularly introduce new courses and workshops to help them become better at their jobs. That will help them improve their skills and qualifications and improve the quality of their work.

Additionally, this method is also helping entrepreneurs. Now, you don’t have to worry about their transition and training period with existing employees, which is an additional expense.

Hire Interns

Adding on to our previous point, hiring interns is also an excellent way to save money and test potential employees for your business. Most interns are college students who only work for a few hours a week and are enthusiastic and eager to learn.

That is an excellent opportunity for you to see if they would be a good fit for the company and offer them a permanent position at the end of their internship.

Use Secondhand Furniture

There is no shame in buying used or pre-loved furniture for your office. It saves you so much money, and it’s also a lot better for the environment.

The same approach works well when it comes to equipment, whether that’s computer hardware, heavy machinery, or anything else for that matter. So long as you check that the items you order are in a good state of repair and have been well maintained, you won’t be making any compromises.

A good way to ensure that the gear you snap up is up to scratch is to purchase from a reputable vendor. For example, Revelation Machinery has high-quality industry equipment available, with competitive prices on used units.

There are a lot of different online platforms where you can browse through thousands of models, styles, patterns, and designs - such as eBay, Craigslist, etc.

The same approach works well when it comes to equipment, whether that’s computer hardware, heavy machinery, or anything else for that matter. So long as you check that the items you order are in a good state of repair and have been well maintained, you won’t be making any compromises.

A good way to ensure that the gear you snap up is up to scratch is to purchase from a reputable vendor. For example, Revelation Machinery has high-quality industry equipment available, with competitive prices on used units.

The same approach works well when it comes to equipment, whether that’s computer hardware, heavy machinery, or anything else for that matter. So long as you check that the items you order are in a good state of repair and have been well maintained, you won’t be making any compromises.

A good way to ensure that the gear you snap up is up to scratch is to purchase from a reputable vendor. For example, Revelation Machinery has high-quality industry equipment available, with competitive prices on used units.

Consider Co-Working Spaces

If you have a small team, consider using a co-working space instead of leasing an office. Since most offices are remote and only get together for important meetings, these can be hosted at a co-working space instead of wasting rent on an office space you hardly use.

If you need permanent office space, another great option to consider is sharing the office with another company.

Conduct Virtual Meetings

Since everyone is working remotely, this is the best time to organize remote meetings. The next time you have an important meeting with a client out of town, request them to make it a video meeting. That will save both of you time and money.

Credit: Unsplash.

While some deals need to be conducted in person, initial meetings can be done online. Skype, Zoom, and Microsoft Teams are great options for free video conferencing.

Disconnect Landline Phones

There are so many businesses that use landline phones, and most often, it’s just because of old habits. However, landlines are no longer necessary, and the same service can be achieved using mobile phones at a much lower price. They are also more flexible and have better plans than landline packages.

Sell Your Product Online

A lot of businesses transitioned to e-commerce in 2020. Earlier, setting up an online store was a long and complicated process, and you needed to hire skilled tech professionals to help you set it up. This turned out to be a considerable expense for small entrepreneurs.

However, you can now easily build your online store yourself at almost no cost. Sites like Amazon and Flipkart also offer their warehouses to store your inventory.

So in the current scenario, selling online can save you costs, especially with marketing and inventory management.

Be Persistent with Payment Follow-Ups

Sometimes, businesses offer products to clients who promise to make the payments later. However, some clients make getting your payment back more complicated than it needs to. After a point, business owners don’t bother following up with these customers.

Make sure you persistently follow up with clients who don’t make payments on time until you receive your due money. Additionally, as much as possible, try to avoid giving credit; take payments in advance, or send partial shipments. You could also ask customers to pledge assets.

  1. Loan Management

It’s not uncommon for companies to take loans from banks to help them start their businesses. However, these monthly installments can sometimes burden budding entrepreneurs financially.

A simple solution would be to talk to your banks directly. Most banks would allow you to pause your payments for a couple of months until you get your finances in order. You could also consider alternative banks where the interest rate is lower.

Do not save what is left after spending but spend what is left after saving - Warren Buffet.

You don’t need to wait to hit rock bottom before thinking about cutting costs in your small business. While every business is different, we hope that you find something useful in these ideas, and they will help you reduce unnecessary expenses while running your business.

If you would like to save money and hire a virtual assistant for your business, click here to get a free consultation with Wishup or reach out to us by mail at [email protected].