Increasing revenue and reducing costs are two ways to increase profitability. We’ve written the definitive guide on how to lower your business operating costs because we specialize in assisting small businesses find savings on their essential costs.
Here are 5 simple but effective ways to reduce your costs in the office:
#1 Make a plan, decide on a goal, and develop a budget.
No company wants to be in the red financially. However, it’s crucial to maintain a high standard of customer service when decreasing expenditures. While choosing the lowest suppliers and reducing any subscriptions would result in more money in the bank at the end of the month, it might negatively affect the quality of your service.
You must develop a budget based on your average monthly income (taking into account seasonal swings), the requirements of your company model, and the expectations of your consumers in order to reasonably cut your operational costs. This last element will ensure that you aren’t lowering the standard of your service to intolerable lows.
When creating a budget, it’s important to overestimate expenses and underestimate revenue. This will provide adequate room to guarantee that your operational costs are paid for each month.
#2 Cutting back on utility costs
You cannot avoid paying for utilities if you own or rent a commercial space. And to make matters worse, it is simple to unintentionally enter into costly contracts because there are no laws protecting enterprises from shady dealings. For these reasons, we believe that cutting your business’s utility expenditures should be your top priority.
The cost of fundamental utilities can be decreased in two ways: first, by decreasing usage to save money; and second, by switching to more affordable suppliers to pay less for your present usage.
For each utility area, there are specific ways to cut utilization. A straightforward four-step procedure you can use to compare and switch vendors is as follows:
1. Gather invoices from all of your spending categories so that you are aware of the monthly expenditures and the remaining time on your contract.
2. By contacting them personally, compare approximately six providers for each area of expenditure.
3. Negotiate with suppliers to see if a better bargain can be reached.
4. Switch by notifying both your old and new suppliers, then putting a contract in place.
Once you are certain that you are working with the ideal provider for your company, think about how you will be paying for the services. Businesses that choose Direct Debit or pay their invoices early may receive discounts from their suppliers. Discounts, no matter how modest, accumulate over time and might be the difference between having to discontinue a service and being able to keep it. Whatever method you use to pay your bills, you should never pay an invoice after the due date since you’ll be subject to steep fines that could leave you in serious debt.
Here is some information you should know about each utility area, keeping in mind the overall principle of switching down, in order to minimize utilization and your spending:
Energy (Electricity + Gas)
There are a few simple modifications you can make to lower your electricity usage:
- If you choose LED choices, switching to energy-efficient light bulbs will reduce usage and last significantly longer, lowering your expenditure on replacements in the near future.
- If you don’t utilize occupancy sensors, you’ll have to teach your staff the habit of turning off equipment when it’s not in use.
While it may require a bit more work to reduce gas use than electricity, the effort will be worthwhile in the long run:
- By retaining warm air inside your company’s buildings throughout the winter, improved insulation can reduce the demand for heaters. Include a sweater or fleece in the uniform of your staff, or allow for some latitude in workplace clothing so that employees can dress in layers.
- Electric heaters might be a more affordable option if your gas costs are greater than your electricity costs and you are unable to break your current contract.
If you are already energy-efficient but still want to save money, moving to a new supplier might be able to help you do so. Watch out for while transitioning between gas and electricity:
- A thorough overview of the electrical costs you’ll incur. Electricity usage in the UK is billed in kWh together with a fixed fee. Your daily fixed rate standing charge pays for the upkeep and delivery of your electricity. Some electricity providers may advertise incredibly low unit costs for their electricity, but they will raise their standing charge prices to a level that is higher than the going rate for your supply.
- Dual rates, when a single firm provides both your gas and electricity. Usually, this will provide lower prices, but shop about to be sure you’re not being taken advantage of.
- Eco-friendly electricity rates will cost a little more than conventional rates despite not being subject to the Climate Change Levy since it costs more to source renewable energy. Consider going with on-site renewable energy sources like solar panels if your company is in a position to make cost reduction a long-term effort. Years from now, these will pay for themselves.
As with energy, adopting healthier habits can save water expenditures by lowering consumption:
- When not in use, turn off the faucets.
- To save water when flushing toilets, install a water cistern.
- Recognize a leak? Check this out because a leaking faucet or damaged pipe can waste more than 5,500 liters of water annually.
- Reusing water can help cut down on both the use of freshwater and waste water. For instance, non-toxic waste water can be used to water plants or flush toilets.
- If your company generates trade effluent, be sure to stay under the permitted limits; otherwise, you risk paying substantial fines for abusing the system. Request a reevaluation of your trade effluent from your provider if it is possible to minimize the amount of trade effluent you use (for example, by using less oil or lubricating machinery using a drain-friendly solution). Your bill’s effluent costs will go down as a result, lowering your overall spending.
Once more, if usage is as low as you can get it, think about transferring to a supplier with less expensive tariffs.
- Your water statement will have a standing charge much like your electricity bill, so be sure to read each charge carefully to make sure the listed prices do not include additional fees.
Broadband & Telecoms
The most crucial factor to take into account when it comes to broadband and telecoms is only paying for the services you actually require:
- Various businesses will need various broadband speeds to operate. While a software firm would require the fastest speeds to function, a tiny cafe that offers free WiFi could get by with slower speeds or a download limit.
- Choosing a VOIP system can save money that would otherwise be spent on exorbitant telecoms packages if your organisation doesn’t handle many calls.
Waste & Recycling
There are a number of ways to cut costs depending on the waste collection service your company uses:
- Reducing the amount of trash produced will save prices if your company uses a “per bag” service, where you pay for each bin bag collected by your supplier. You can accomplish this by recycling more frequently, avoiding single-use items made of paper, card, or plastic (such cups, cutlery, and paper towels), and promoting a paperless office.
- Not restocking your trash cans each week? To check if you may decrease the frequency of bin pickup, speak with your supplier. Reducing the frequency of collection could cut your costs in half if your bins are only half full each time they are collected.
- You can be squandering money on an expensive contract with numerous card terminals if your company only accepts a few card payments each month. Make sure you have just enough card terminals to work and not too many.
- As an alternative to using more conventional devices, you might choose to use a less expensive card reader from a company like SumUp or iZettle to accept payments. You may use them anywhere you are because they are portable and wireless and still have a professional appearance.
#3 Taking advantage of technology
There is no disputing the positive effects of technology on workplace productivity; automating corporate procedures may boost effectiveness, save time, and boost client and customer happiness. Additionally, making use of the technology at our disposal might help to cut expenses without compromising the services your company can offer.
A variety of corporate operations can be automated using technology. Digital software advancements have made it possible to perform duties with a few clicks in a variety of areas, including accounting, payroll, marketing, and human resources. By reducing the amount of time personnel must spend on these kinds of jobs, automation helps businesses cut costs by reducing the need for a larger workforce. Automation decreases the possibility of human error as well, saving time and money by reducing the need to correct errors that might otherwise be committed by humans.
Additionally, each task may provide its own benefits:
- The use of cloud accounting tools by small firms to manage their bookkeeping reduces the need to outsource their number-crunching.
- Receiving, sending, and storing invoices outside of your company’s location or accounting firm can be more expensive than digitizing them.
- Because AI can choose the most appropriate answers from a list of demands based on customers’ inquiries, an automated chat bot can eliminate the need for human customer support.
It’s crucial to keep in mind that there can be opportunities to save money using the technologies you already have:
- Excellent free alternatives for group communication and video calls include WhatsApp and Skype. Additionally, they can avoid paying for VOIP equipment in order to place calls.
- G Suite can provide a more affordable and comprehensive alternative to Microsoft365.
#4 Outsourcing business processes
You could choose to outsource processes rather than automate them to cut down on staff expenditures. Businesses typically contract with firms to handle their marketing duties. While still producing trustworthy findings, this can be significantly less expensive than paying a full-time employee’s wage.
There are numerous alternatives for outsourcing:
- Websites like Fiverr might help you hire a professional for a reasonable price for one-time jobs. To obtain a sense of the outcomes you can anticipate, check reviews of the freelancers you are considering as well as their portfolios, if accessible.
- Using a Virtual Assistant Agency; such as vahappy.co.uk, for ongoing business requirements will be preferable for developing a relationship with someone who can truly comprehend your organisation.
- Your company may find it more cost-effective to outsource its manufacturing to a nation with lower labour rates, but you should be aware of the conditions under which your products are made. Think about whether the products are being supplied ethically and balance this with the savings you anticipate.
#5 Cutting down on office space
If there’s one thing the coronavirus pandemic has taught us, it’s that many companies could use a lot more flexibility in their workplace space. In light of that:
- Telecommuting may help you save money on operational expenses by lowering the demand for space employing a hotdesking strategy if your company is ready to allow employees to work from home.
- By lowering your demand for storage space and enabling you to downsize, a shift to a paperless office may allow you to save money.
- Although you’ll likely pay for a smaller portion of a shared service and have less control over your utilities, renting a shared workplace can be less expensive than leasing separate premises.