How to Reduce Operational Expenses For Your Business


If you’re a business owner, you probably know how important it is for you to gain control and oversight of your operating costs. Operational expenses can make or break a business. You could easily be bringing in tons of new clients or selling lots of products but still be in the red if your operational expenses are out of control. 

If you want to start seeing bigger profits for your business there are two things that you can do. You can either start making more sales or you can gain control over your operational costs. While making more sales is a great way to boost your profits, cutting costs at the same time can help you transform a struggling business into a powerhouse.

What follows are 12 tips for how to reduce business operating costs along with a handy quick reference infographic provided by Idea Maker.

1. Use Intelligent Software

One novel idea that you can use to help you reduce operational expenses for your business is to use intelligent, custom software to help you to automate and improve your processes. Did you know that custom software for your business can help you to save up to 70 percent on operational expenses? Custom software can be made to fit your business’s unique needs and allows you to easily use technology to help you streamline your business for reduced operational costs.

2. Seek Expert Advice

Another thing that you can do to help you reduce operational expenses by up to 47 percent is to seek out the advice of professionals. For example, instead of trying to manage your business’ bookkeeping and tax accounting yourself, you can hire a tax accountant or professional bookkeeper to help you better manage this aspect of your business. Often professionals have effective ideas from their years of experience that can help you cut costs on items that you never considered. 

3. Negotiate

If you’ve already tried using software or expert advice to reduce your operating expenses but had no luck at really making a difference in your costs, you can try to negotiate better rates with your customers and vendors. When trying to negotiate better rates, you will often need to do some legwork to help you reduce expenses. For example, if you are trying to reduce expenses with a shipping vendor, you may need to contact their competitors to see what their rates are for the service. You can then tell your vendor that prices are lower elsewhere and ask them to match or better their offering to keep you as a customer.

4. Allow Remote Work

This method of reducing operational costs will typically not work for companies that need their staff on-site to perform the work. But if you can operate normally with the aid of technology, it may be a good idea to look into allowing your employees to work remotely. This can help you to save money up to $11,000 per employee that telecommutes. Savings typically come from reduced lighting and HVAC. Additionally, there are many employees that would gladly take a pay cut to be allowed to work from home.

5. Pay Early

If your business is in the habit of paying either on-time or late, you may want to rethink this strategy. When you pay late, you incur late fees that can add to your operational expenses. Furthermore, by always paying right on-time, you open yourself up to situations where your payment might be late or lost in the mail and cause you to pay a late fee. Often, many vendors will give you a discount for paying your invoices early.

6. Consider a CRM

A CRM or Customer Relationship Management software is a program that helps you to gain better control over how you deal with your customers. Using a CRM can help you to save up to 34 percent on your operational costs this is primarily because using this kind of software can help you to reduce your offerings to the ones that customers want, helping you to streamline your business. 

7. Cancel Services

Just as you do in your home when you realize that while you’re paying for Disney+, Netflix, and Hulu you tend to only use Netflix you begin canceling all the other unused streaming services, you should do the same with your business. If you are paying for a bunch of different SaaS products or services, you may want to reevaluate if you are actually using them. Or if there is a cheaper alternative that has all the features of the many services. Doing this can help you to save up to 10 percent a year on your operating costs.

8. Go Green

Helping the environment is often its own reward but did you know that by being more environmentally friendly with your business practices, you can save thousands of dollars a year? For example, by switching to energy-efficient equipment (typically energy star rated) you can save up to 80 percent on your electricity costs annually.

9. Hire Freelancers

Hiring freelancers can be a great way to save money on employee expenses. On the one hand, you’re helping someone make a living while on the other hand, you’re saving money on taxes and fees. If you aren’t sure what goes into hiring a freelancer, consult a human resources specialist before making this choice.

10. Downsize

As mentioned earlier in this article, when you allow your team to work remotely, you will no longer need quite as much space in your office building. Even if you aren’t telecommuting, reconsider if the office space your using really fits your needs. By auditing your actual needs for office space you can help your business reduce operational expenses effectively.

11. Seek Employee Feedback

Your employees have great experience in producing your products or helping you run your business. If you’re looking to improve how your business runs and reduce operational expenses you can seek employee feedback for tips on things they think might help to improve the business. You can even offer a small bonus for tips that help you to reduce expenses.

12. Inventory

Most businesses need supplies to continue to do business. Manufacturing businesses often have a lot of inventory but all businesses have office supplies that they need to do their jobs. One way that you can save money on your operational expenses is to inventory your supplies on a semi-annual basis. This will help you to stop ordering more than you need saving you nearly 30 percent on supply costs.

We hope these tips help your business to continue to thrive and grow. By reducing operational costs, you can hire more employees, increase your marketing spend, and boost your profits for better growth.

Tips to Reduce Operational Costs in Business

Photo by Stephen Phillips – on Unsplash