What are the simple cost cutting techniques that I can implement today?
Need a serious thought…
1) Review all expenses, even the little ones.
You can’t manage something which you don’t track. If you are not keeping record of all your expenses, you should start doing it right now. A good accounting software and accounting expert can help you categorise expenses and help you take measures to reduce them.
2) Check for unnecessary expenses
Review your budget with a magnifying glass and making sure all of your expenses are still necessary. For example, perhaps you purchased a magazine subscription a long time ago that you no one reads.
Check all such expenses and get rid of unnecessary ones.
3) Use 80/20 principle.
Pareto’s 80/20 principle states that 80% of the outcome is caused by 20% efforts. You can apply this powerful principle to limit expenses on those 80% activities that are not generating enough income for you.
4) Cut traditional advertising in favor of low-cost alternatives.
Traditional advertising methods like buying print or TV Ads and putting up hoardings can get very expensive these days. Explore new tools like Google AdWords & Facebook Ads to advertise your product to the targeted audience.
You can target users from a specific city, age-group and demographics and get good returns on your marketing investment.
5) Be a good neighbor.
Split advertising and promotion costs with neighboring businesses. Jointly buy the hoarding space or take your marketing alliance further by sharing mailing lists, distribution channels and suppliers with businesses that sell complementary goods or services.
6) Create partnerships for marketing
You might have seen the TV advertisements where DTH box comes bundled with a TV. Explore opportunities to partner with non-competing companies to promote your product and save on marketing expenses.
Its important to make sure that the partnership is mutually beneficial for both the parties otherwise it will not yield the desired results.
7) Think beyond the cash, Barter.
When that cash supply gets low, which is a common thing in case of small businesses, don’t close the door on getting what you need. Consider the ages-old practice of bartering. Nidhi Tatia –Bangalore based accountant used bartering successfully by offering her own CA services in exchange for work by an interior design firm when she needed an office redesign. As with any negotiation process, the worst answer you can get is a simple no, and you might be surprised by how quickly you’ll hear a yes.
8) Look up in the cloud
You can save lot of time and resources by adopting cloud computing. Employees can work remotely and use online collaboration tools to get the work done. For example, you can use Dropbox to share files, ProfitBooks for managing finances online, WebEx or Skype to have virtual meetings.
9) Go green and save the green stuff.
Simple moves such as keeping equipment on a power strip and turning it off when not in use, or replacing your existing printer with one that prints on both sides of the paper, thus reducing paper waste and cost. Since the object of many environmentally friendly changes is to save energy, and you have to pay for the energy your business uses, if you can reduce energy use you will also be reducing your costs
10) Have virtual meetings
Next time you have a meeting with your client in another city, request them for a Skype call. Using latest technology, you can save a lot on travelling expenses. We push for a Skype call even when the meetings are within the same city. I understand that a first meeting is important and should be done face-to-face but all followup meetings can be done virtually.
11) Pool Purchasing Power
Nowaday, home buyers come together and manage to get a good deal from the builder.
Find other small-business owners and collaborate with them to save money on supplies and other goods. You can even save money while importing goods from another country.
12) Always Ask for a Discount
They may not advertise it, but many top retailers will discount their items for small business owners. You just have to take the initiative to ask.
Sometimes, you can even get discounts when you pay within the credit period. All you have to do is to ask.
13) Track inventory closely
If you run an inventory-based business, carrying less inventory means having less money tied up and more money in the bank. Begin monitoring inventory more closely to make sure you aren’t spending more than is really needed.
If you manage inventory manually, consider adopting an inventory management software to keep better track.
14) Be very aggressive with past-due accounts
Make a list of customers whose payment has past the due date. Start calling them and follow up for the payment. Get aggressive and express your urgency with them. If you do it right, some customers might release the payment on the same day.
15) Sell online
By now, you probably know that online commerce is a big deal. Earlier, it used to take a lot to build your own eCommerce store. But nowadays, its easy to setup seller accounts on eCommerce market places such as Flipkart, Snapdeal or eBay. Sites like Amazon even offer their warehouse to store your inventory.
This can save huge costs in marketing and inventory maintenance. In fact, this is something which you can let you operate from a small room.
16) Restructure your loans
If you have taken a loan and it’s installments are causing a burden on your monthly cash flow, just talk to your bank. Most banks can give you an option to either pause it for a specific period or help you restructure to increase the tenure and reduce the installment.
Alternately, you can talk to other banks for lower interest rates and improve your cashflow.
17) Treasury management
This may sound a big word for early stage businesses, but its one of effective way of generating money on ideal funds. Current Account with bank does not give any interest on ideal funds in account. One can invest via Mutual Funds in debt funds for duration as low as 2 days and look forward for tentative interest of ~8% p.a.
There is online investment facility now a days with zero paper work. Any small amount generated can take care of your phone bill or electricity bill !!
18) Hire smart, inexperienced people.
Experience is important but it isn’t everything, and it comes at a cost. More and more technology companies now hire fresh college grads and then train them for a month or two. It turns out to be very cost effective than hiring an experienced person. For critical work scenarios, you have no option but to go for experienced people but in most cases, strategy of training freshers works.
You will not only gain a monetary advantage by providing an entry-level salary but you will also benefit by having employees who are enthusiastic, up-to-date on the latest technology, nimble and eager to learn.
19) Get interns
There are lot of non-critical activities that can be delegated to interns. They are enthusiastic and full with energy. Sometimes interns are ready to work for free and if they are really adding value, you can hire them as a permanent staff. Interns are good for activities like social media promotion, back office administration, market survey or other short term tasks.
20) Commission your sales force.
Overhead, salaries, incentives, training costs, fringe benefits and expenses add up when you’re hiring your own sales representatives. Contracting independent manufacturers’ sales reps, paid on commission only, is less expensive-and often equally effective.
If you prefer to have in–house sales team, try to structure their salaries in such a way that larger percentage is allocated to commission and fixed component is on a lower side.
21) Outsource Non-Critical Tasks
There are lot of tasks that can be outsourced these days. You can hire freelancers to design company logo, do social media promotion, maintain accounts, generate sales leads and much more.
22) Cut extraneous employee expenses, not employees.
This is self-explanatory. When we noticed larger phone bills, we started putting the cap on it. As a result, employees started using the phones more responsibly. Similarly, put a cap on travel expenses.
23) Reward your profit-makers.
It may sound a little contradicting, but spending to save does make sense in some cases. I would suggest to take the proactive approach of rewarding profitable behavior from both your employees and your customers. What does that look like? You can start by making small gestures, like an occasional free lunch or a treat, to boost employee morale and keep the work environment positive.
It could also mean offering bonuses to employees who meet certain cost saving targets set for that year, and offering deeper discounts or value-added packages to your most loyal customers. If you’re spending a little money on the people who do the best work for you, or purchase the most product from you, you’re simply investing in a relationship that will ultimately bring more profit to your business.
With little imagination and experience, you can find out the way to cut costs and save money in your business. It always helps to talk to fellow entrepreneurs and understand best ways to save money from their experiences. Money saved is money earned.