27 Dec Cutting Costs: 5 Tips To Lower Your Company’s Operating Expenses
In a competitive marketplace, only the leanest companies survive. The better you are at cutting unnecessary costs, the more likely you are to thrive under difficult conditions. The following tips will streamline your company budget, sending your expenses through the floor:
1. Allow Your Employees To Work Remotely
Modern telecommunications make it easier than ever for your employees to work from home. Letting them do so will lower costs dramatically. If fewer workers come to your office, you won’t have to clean up after them or provide them with water, coffee, electricity, or office supplies. Remote work also lowers travel costs and reduces disruption from sick days.
2. Replace Buying With Bartering
Whenever you have inventory or assets you don’t need, consider trading them for those you do. Bartering lets you get rid of unnecessary items while also lowering your spending on business purchases. You may also be able to lower your taxes, notably by claiming the 1031 provision in the tax code. This provision lets you delay or avoid paying taxes if you trade one item for something of equivalent or superior value. An experienced tax professional can tell you if an exchange will qualify for 1031 treatment.
3. Hire Only The Best Employees, And Retrain Them As Needed
Paradoxically, cutting costs sometimes means spending more money upfront, and this is particularly true in hiring. Businesses typically choose employees on the basis of how much money they will have to pay them, selecting those who demand relatively low wages. Although this will lower your operating costs in the short term, expenses will be far higher in the long run than if you had hired loyal, competent, intelligent employees. Investing in the best employees allows you to:
- Mitigate mistakes—quality employees are less likely to err in their duties, leading to fewer liabilities, less need to recall products or compensate dissatisfied customers, and a better reputation for your firm. All of these results save your company money.
- Improve morale—the best employees are confident in their skills, giving them greater motivation to do their jobs. Your firm thus will not suffer from the productivity losses associated with demoralized employees.
- Reduce turnover—competent, trustworthy employees are less likely to leave your firm, saving you from the cost of looking for replacements.
In order to fully take advantage of quality employees, you must be willing to retrain them whenever they need new skills. Though training can be expensive, the cost is far lower than that of finding new workers with those skills. Training your employees also demonstrates that you value them enough to invest in their knowledge, further improving their morale and loyalty. You can save yourself a lot of headaches by properly screening them in the first place, which includes a background check and drug testing.
4. Pay Off Your Debts
One of the smartest investments your business can make is to become debt-free as quickly as you can. Interest payments on debts are far higher than the returns to most other activities you could spend the money on. By paying off your debts’ principles as quickly as possible, you reduce the total amount of interest you will have to pay. Depending on the type of debt, you may also be able to negotiate a lower interest rate if you pay a large portion of the principle ahead of schedule.
In addition to the short-term benefit of freeing yourself from interest payments, eliminating debt quickly also improves your credit score. Thus when you take out additional loans, as most businesses must do periodically, you can get them at lower rates. The cost of borrowing or mortgaging your property will thus be significantly smaller in the long run.
5. Take Advantage Of Technology
In the modern economy, adopting new forms of technology is not an option. You do have a choice, however, in how quickly you choose to take advantage of the latest devices. If you pay close attention to new technological developments and adopt useful devices as soon as they are available, you will have more time to figure out how to use those devices effectively. Your firm will thus be less likely to make mistakes with those devices, saving you from the costs of company errors. New technologies also have the potential to lower your energy use, improve product quality, and reduce the need for labor, all of which drive operating costs down.