Cutting various costs can be an easy and quick way to up the profitability of your business. When you introduce cost reduction planning and measures, it helps bring in savings immediately and you are able to maintain your profitability in the long term.
However, it’s crucial that any cost reduction measures you incorporate are carefully managed. It’s definitely beneficial to eliminate errant expenses, however unplanned and extensive cost-cutting could impact quality. It could also affect the morale of your staff because they fear being made redundant or because they don’t have the tools to conduct their job in an efficient manner.
This particular risk can be significantly reduced by identifying the areas where you can trim costs safely, setting clear and consistent cost reduction targets as well as researching cost saving initiatives thoroughly before making any changes to your business.
Effective cost control planning
The very first step towards cutting costs is to identify what you glaring cost centres are and these are most likely to include:
- Sales & marketing
- Purchasing
- Production
- Administration
- Facilities maintenance
- Financing
Begin by keenly assessing your profit & loss statement for the past 6 months, and then rank all your business expenses from the highest to lowest ones; working your way through the list and pinpointing areas where you know you would be able to reduce costs. It’s also a good idea to prioritise identifying various cost-saving measures in the areas where you’ll experience the most significant return.
Try out new ideas
You may find that it’s extremely difficult to anticipate what your savings are unless you actually implement new processes and systems. Keep in view that any of the changes you make, don’t have to be permanent. At some point, if you feel unsure about whether a particular cost-saving measure isn’t suitable for your business, just consider trialing that for a 4-6 months and then assessing the results. In this manner, you’ll get a clearer idea of how much savings you’ve made, without having to firmly adopt those changes and processes on a long-term basis.
Benchmark all new systems and processes properly and frequently revisit them to make sure they still complement the workings of your business. Consider asking staff for feedback around any changes to make sure there are no hidden problems that could be costing you more than the cost-saving value. If you have your doubts about the potential changes, consider seeking advice from a professional in the industry, a business mentor, your accountant or a business consultant.
How to make quick savings
Here are some ways in which you can easily trim costs without making any drastic changes:
- Reduce inefficiency – You can do this by identifying manual tasks that you can complete less frequently or get computerised.
- Eliminate unneeded costs – Begin heating costs, waste reduction and utilities charges.
- Be smart while committing to fulfilling orders – It’s best to avoid smaller, frequent orders as they cost much more than the larger orders and tend to take more time to complete as well.
- Cut down travel expenses – Ensure that you and your executives use economy flight options and cheaper accommodation while on business trips.
- Buy goods smartly – Identify which of your suppliers are charging high rates and make it a point to negotiate better payment discounts/terms on purchased goods.
Conduct brainstorming sessions with your employees; they may be able to provide some useful suggestions that may not have crossed your mind. Once you have a better idea of the major cost centres, you should then identify potential methods of changing existing processes to save money.
For effective and sustainable cost reduction opportunities & efficiencies that will increase your bottom line, contact the experts at Benchmark Cost Solutions at this number – 02 9525 0777. If you prefer, write to us at this email address, and we will revert quickly.
Thanks for reading,
Benchmark Cost Solutions Team
02 9525 0777
