How to reduce business operating expenses

No business wants to waste money, time, or other valuable resources. Especially during challenging times, you must be on the lookout for ways to reduce business operating expenses in every area or department.

What are operating expenses?

Looking at your business balance sheet and income statements will quickly reveal your revenue and costs, but what are the elements that make up those costs? These are your operating expenses and typically include:

• Cost of goods sold – what you spent to provide goods and services to your customers
• Labor – payroll expenses amount to one of your largest operating expenses
• Sales commissions – if your business includes a team with commissions and other incentives
• Benefits – health insurance, retirement contributions, etc. – another significant expense
• Depreciation and amortization
• Rent or facility payments
• Building and equipment maintenance

Other operating expenses may not be as significant, but they add up to a considerable cost against your operating income.

How to reduce expenses in your office

Try walking around your office and surveying the business processes in motion. Almost without exception, you will uncover ways to reduce costs quickly.

Printing

How many fax machines, printers, and copiers do you have? Chances are, some are not being used efficiently, or you’re making copies of documents that no one uses or needs. What is the paperwork used for? When the task is complete, what happens to it?

You can probably run your business just as efficiently – or more efficiently – with less printing and fewer copies. Having less hardcopies will save money on paper, printers, supplies, maintenance, and electricity.

Remote workforce

Do your employees need to be in the office? More than ever, companies of all sizes are leveraging technology to allow work-from-home options for at least some employees. Many businesses find that this amounts to improved morale while maintaining productivity levels.  

Communications tools such as Microsoft Teams allow your staff to stay in virtual contact with high-quality audio and video, chat functions, and sharing of documents in real-time. Remote teams offsite can save office space and reduce the need for employee travel expenses. Video conferencing can take the place of costly offsite meetings, saving time and boosting efficiency.

Inventory management

Are you managing your inventory effectively? Excess inventory is costly from several perspectives – taxes, space requirements, and potential waste from spoilage or obsolescence. There are many economical inventory management programs available to help you manage your inventory to save costs in purchasing, storing, and managing inventory levels.

Outsource

Where feasible, utilize contractors or outside suppliers for tasks like bookkeeping or other office routines – especially where the functions are not customer-facing. Outsourcing can free your employees for handling more meaningful tasks such as supporting customers or following up on sales leads.

IT functions are another potential area where outsourcing may be appropriate for your business. Contracting with hosted internet services to create and manage your website and provide business applications can be a significant saving over building your own IT infrastructure and hiring technical expertise.  

Another advantage of contracting for hosted IT services is the use of cloud storage. It minimizes the possibility of lost files or files ending up at unauthorized staff. Saving documents in the cloud makes them secure, while still being accessible to your team from anywhere.

Other functions where you should consider outsourcing:

• Customer service – help desk services can save you money over hiring internal employees. You can forward problems that need more attention to the relevant in-house teams.
• HR – services can manage your payroll and benefits processes for you, with fully-trained personnel to handle tax issues and other compliance regulations.
• Legal matters – hiring internal legal teams can be extremely costly. Outsourcing with competent services that understand your business may be a better – and less expensive – approach.