How Can My Business Really Save Money?

The primary purpose of every business is to make money; to generate a profit. If there is no return on effort and on a business’s investments, the business will surely die. There are clearly two major ways to generate profits: increase revenue and decrease cost.

A key solution to control and reduce business cost is outsourcing, a widely embraced practice where a business hires a party outside the company to perform services that could otherwise be performed inside the company. This practice is not only cost-driven but also efficiency-driven. As business strategist Peter Drucker suggested, “Do what you do best, and outsource the rest.”

What are the Advantages of Outsourcing?

There are approximately 300,000 jobs outsourced in the United States each year so outsourcing can be an important way to save labor costincluding the cost of health insurance and vacation pay. And, it offers even more advantages. A business can:

  • Gain skilled expertise at a reasonable rate without bringing on full-time employees, thus saving on recruiting and training expenses.
  • Acquire talent that may not be resident in the existing staff, thus increasing the quality of services provided.
  • Enhance its productivity and efficiency by focusing existing team members on the most mission-critical activities.
  • Improve its agility and flexibility to adapt to varying business situations, needs, and priorities, with less permanent staff to guide, shift, or even cut at tough times.
  • Reduce risk by involving professional specialists qualified to comply with specific laws and regulations, including tax accounting, for example.
  • Allow increased focus on customer management in place of time spent on employee management.
  • Save cost on facilities space and the capital requirements of employee support.

Ways to Save Business Cost

  1. Outsource functions with a higher level of expertise, including finance and accounting, audit, human resources, legal services, social marketing, and technology services.
  2. Examine competitive freight services and packaging for ways to lower cost.
  3. Negotiate reduced legal fees.
  4. Negotiate reduced bank and credit fees.
  5. Find ways to lower the cost of insurance by seeking new competitive quotes.
  6. Seek reduced audit fees.
  7. Examine your customer base to ensure that you are selling most effectively to the right customers.
  8. Seek lower office space costs. That can include renegotiating a lease or moving to a different space. Consider more remote working opportunities.
  9. Barter for some business goods and services.
  10. Reduce vehicle expenses and travel costs.
  11. Examine supply costs to seek every cost advantage.
  12. Eliminate unnecessary discretionary spending and purchase more carefully.
  13. Look for cheaper credit card processing services.
  14. Examine employee perks to see if there are any that are not useful or meaningful.
  15. Ask creditors to write off a portion of the expenses that you owe.

Mistakes to Avoid in Attempting to Reduce Cost

Effective cost reduction cannot be accomplished by “slash and burn” methods. Rather, a strategic examination should be used to avoid mistakes:

  1. Don’t cut salaries without considering the effects on morale, productivity, business effectiveness, and employee retention.
  2. Don’t create burdensome and complicated processes to save money.
  3. Don’t hire high-priced stars to fix an underperforming team.
  4. Don’t do indiscriminate layoffs.
  5. Do invest in team members and in needed tools.

Get Expert Financial Assistance to Increase Business Effectiveness

Contact Doerhoff & Associates, CPA, based in Jefferson City, MO for professional accounting and financial assistance that you can count on. Doerhoff & Associates has one goal in mind, to provide comprehensive business accounting services designed specifically for your success.