30 ways to cut business costs

As business conditions slow and business costs increase, it’s becoming increasing difficult to rely on earnings growth to improve the bottom line. Check out these simple business cost cutting ideas to improve profit and cash flow.

Astute managers are more often looking to unlock the profit opportunity that lies hidden within their businesses costs. After all, the impact of a one per cent savings in costs can equal two per cent in profit or 10 per cent in top-line sales on typical margins.

Fortunately, you don’t have to do it by yourself. There are consultants available to help you cut costs and find extra profit. They provide an impartial review of a company’s expenditure, examining potential ‘profit leaks’ and identifying areas for savings that, once achieved, can be used to fund business development or go to directly improving profit and cash flow.

“Most companies do not have the requisite staff resources to be able to regularly review expenses and reduce costs or to put aside time for monitoring of the market place and of their suppliers,” says Denis Stevens, managing director of Expense Reduction Analysts Australasia. “Consequently most, if not all, organisations overspend significantly on their business operating costs, in some cases by as much as 75 per cent.”

To give you an idea of the kinds of things that a company like Expense Reduction Analysts takes into consideration when investigating a cost management solution, we’ve put together a list of 30 ways your business might find extra profit.

Starting with the big picture…

1. Centralise purchasing
You may be buying the same goods from different suppliers! Coordinate the spending of different departments to maximise discounts through bulk purchasing power.

2. Cut the paperwork
Request monthly, consolidated invoices to improve cash flow and reduce administration costs.

3. Ask for a reason
Don’t accept a price increase without challenge.

4. Get a second opinion
Obtain alternative quotes on everything. Advise existing suppliers that the business is being tendered, and give them a chance to reduce their prices.

5. Call in a negotiator
Never allow the person in daily contact with a supplier to negotiate price. Use the good cop/bad cop approach, calling in someone else, so that emotion is not involved in the process. This also allows the day-to-day relationship to remain unaffected.