Five Ways to Reduce Business Expenses
Reducing your expenses isn’t a single, massive act. Rather, it comprises of small actions spread across the different areas of your organization. If you’re looking for realistic ways on how to reduce business expenses, you’re in the right place.
What are Business Expenses?
Business expenses are costs your business incurs from its day-to-day operations. It includes everything that you need to pay for — from the payroll of your employees down to the official dinner meetings with your clients.
Monitoring where your money goes allows you to pinpoint the areas where you overspend and gives you the ability to devise effective cost-cutting strategies. You can automate this process by using a business expense tracker software.
List of Common Business Expenses
Before we dive into the ways to reduce business expenses, let’s review first where they usually come from:
- Office supplies
- Maintenance and repairs
- Wages and employee benefits
Related: Five New Normal Expenses for Small Business post-COVID-19
These are the expenses that your business can do without. At first glance, they may seem like heavy liabilities. But if look at them from a vantage point, you’ll see that they’re good investments as long as you’re utilizing them to the fullest extent possible.
5 Ways to Reduce Business Expenses
1. Consider remote working to lower operational expenses
Remote working is an ideal way to reduce your expenses if your business seldom interacts with customers face-to-face.
When the majority of your staff are working remotely, you won’t need a big office space. Perhaps you can even move to a smaller location with lower rental fees.
“But what if I still want to maintain physical connections with my employees to make sure we’re cultivating the culture of belongingness?”
If that’s the case, you can divide the number of days they work on-site and remotely. Ask your staff what they prefer. While some of them may want to work from home, some may like to stay at the office. Once you know their preferences, you can organize their schedules and let them share their workstations to maximize the space.
Aside from the rental fees, remote working can also result in a tremendous drop in utility bills because fewer employees are using electricity.
2. Use energy-efficient appliances.
Investing in good quality energy-efficient appliances can lower your electric consumption by up to 30%. These appliances are powered by advanced technology designed to conserve energy while maintaining optimal performance.
While it may cost you more bucks, it sure is a good deal, especially when you look at its long-term benefits. Not only will you save money on energy bills but it also makes your business operations more environmentally friendly.
3. Limit the use of office supplies by moving to the cloud.
No, you don’t need extra pens, pencils, papers, and other thingamajigs in your office only to be left unused on your employees’ pedestals. You may not notice it but the costs of those ‘extra’ supplies that you’re keeping ‘just in case you need it’ are actually piling up.
Moving your processes to the cloud is a cost-efficient solution for this. Here are some ways to get started:
- Go paperless. Rather than printing your documents and storing them in physical locations, save them online. This also minimizes risks since it protects your pertinent documents from untoward incidents such as fire and theft. You can find free applications online like Google Drive and Dropbox.
- Practice online file-sharing or utilize email when submitting reports.
Using the cloud brings several benefits like access to the latest business applications, better collaboration with your team, and secure storage space.
4. Write off your tax-deductible expenses
Tax management is pretty broad and complicated. It has different types with varying policies. A single business entity alone needs to pay several taxes including income tax, employment tax, and excise tax. Therefore, knowing the types of taxes you’re paying and some of its exceptions can give you more ideas on how to reduce business expenses.
Familiarize yourself with your tax-deductible expenses and tax incentives to reduce your tax liability. Knowing these pieces of information allows you to pay only what is due to your business. The U.S. Internal Revenue Service (IRS) implemented rules regarding this, which you can read here.
Tax management can be quite complex and overwhelming so it is better to get the help of a professional accountant.
5. Cut staffing costs by outsourcing
Keep your staffing costs manageable by hiring only the key people you need. However, you should let them focus on their expertise and strengths rather than making them handle tasks that are unrelated to their job descriptions.
Meanwhile, for the non-core areas of your business, outsourcing is the best way to go. It helps you fill in other positions to keep your operations up and running.
Take your time to assess where you can start cutting costs without hurting your business operations. Hopefully, these five tips on how to reduce business expenses can motivate you to kickstart your journey towards better financial health.
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