When things are going well and the profits are pouring in, then perhaps a focus on cost savings doesn’t have to be at the top of your priority list. Most companies though, in these days of slim margins, need to pay attention to areas where savings can made. Here are some ideas for places to start looking.
Negotiate Better Terms With Suppliers
At least once a year you should sit down and review the payment terms your regular suppliers are offering you, and ask for better ones. Early payment discounts can be very valuable, as can quantity price breaks. If your cash flow is reasonable, consider ordering bigger quantities less frequently, and ask for a discount. If you are borrowing money, take care that you have the best rates available, and if your loan is in good standing, don’t be afraid to go back to the lender and ask for better terms.
Outsource Where Possible
If you only need three quarters of a person, say, to deal with salaries and wages, then outsource the work, rather that under-employ a whole person. If you have a short term project, it makes sense to outsource rather than employ someone only to have to let them go when the project is completed – which might be easier said than done. Focus on your core competencies, and let other experts do the rest.
Use Space To The Maximum
Do you have spare office or warehouse space? Perhaps you’re planning on expansion eventually, but in the meantime, can that space be rented out? Perhaps you could trade services, for example, rent an office out to a marketing expert in exchange for marketing services. Or perhaps you have a store that can accommodate a store within a store; this can be a great way of attracting more customers for both enterprises.
Hold On To Your Staff
Staff turnover is a hidden cost. Don’t skimp on salaries and perks; if you have great people, do your best to keep them. The cost of recruiting new people, who probably won’t be as good as the old ones, is much higher than adding a few percentage points onto salaries or giving good performance bonuses to keep existing staff happy. If you are known as a great employer, word gets around, and when you need new hires, they will be easy to find.
Bartering with companies around you is a great way to save money and to utilize spare capacity. For example, perhaps you have grounds maintenance company, and the company next door does tax accounting. You have Charlie, who has a couple of hours to spare each week, and they have Mary, who is slightly under-employed too. Swap services, use spare capacity, and everyone benefits.
Make It A Team Effort
Let your whole staff know that you are looking for cost savings, and have a suggestions system in place which rewards good ideas for making savings. Things like adjusting the ac or the heat, turning off lights, turning off computers at the end of the day, finding more efficient ways to carry out routine tasks, are all things that everyone can help with. And every little helps when it comes to shaving costs.