The worldwide supply chain crisis and global economic problems like rampant inflation are turning 2022 into a year of high prices and shortages for consumers and producers. The challenge is particularly relevant for owners of small and medium-sized businesses. One of the most effective ways to avoid raising prices and risk losing customers is to cut costs. Focusing on the expense side of the ledger can give entrepreneurs keen insight into cost-cutting methods that promise to make daily operations leaner and simpler.
In addition to sophisticated fleet software for transport firms, founders and managers practise smart outsourcing so they can focus on what they do best, employ strategic inventory policies to reduce the cost of holding excess goods, and build remote work organisations to eliminate paying rent for office space. The following techniques can help any business save money.
- Fleet Management Systems & Software
- Smart Outsourcing
- Work Remotely
- Use Economic Ordering Quantities
- Make a Two-Year Plan
Fleet Management Systems & Software
Transport companies can cut expenses by using fleet management software and advanced systems for maintaining, tracking, and routing vehicles they own and use on an everyday basis. It’s possible to reduce expenditures with fleet system functions like GPS tracking software. The beauty of this approach is that managers can observe fleet activity in real-time and identify any problems instantaneously. Fleet programmes also minimise expenses by maintaining extensive driver records. That way, there’s no danger of a particular operator going past the allowed number of hours behind the wheel and incurring a large financial penalty for the company. Fleet software assists with creating efficient routes, monitors fuel usage, and reminds managers when vehicles need routine service.
Smart Outsourcing
Too many startup founders are either completely against outsourcing or totally in favour of it. The wise approach is to take the middle ground and hire others to do those tasks that you or your team can’t do. If you and three partners own a new tech consulting firm, it would make sense to outsource the accounting function, particularly as it applies to the preparation of tax returns. Tech experts rarely have the financial skills to complete tax forms with the level of competence needed for error-free documentation.
Likewise, a small accounting firm should seriously consider hiring IT pros to do website development, cyber security, and related tech chores. The main thing to remember is to choose the several areas where you have talent and do them yourself. Make an honest listing of what your company cannot do, and give serious thought to hiring specialists to do those jobs.
Work Remotely
For most startups, the single biggest business expense is rent. Companies that work remotely sidestep this cost altogether. But there are other, more subtle reasons that it makes good financial sense to run a remote workplace. If your organisation’s product or service allows for this kind of operation, you’ll soon discover that not only rental costs but also supplies, utilities, and liability insurance expenses are nearly non-existent in a remote working environment.
Use Economic Ordering Quantities
Also called EPQs, this important parameter gives business managers vital information about how much inventory to keep on hand. As long as you have some rough sales data to work with, it’s possible to calculate your company’s EOQ and save money. How do owners save? It costs money to order goods, have them shipped to your location, store them, and pay for insurance.
Even small organisations that sell goods in small quantities can make use of the EOQ formula. Knowing how many items to have on hand at any given time is a worthwhile tool for minimising carrying costs. EOQ is particularly beneficial for sellers of large, costly goods. The principle applies not just to finished products you purchase for modification or direct resale. It’s equally helpful for manufacturers, artists, and others who routinely buy components and materials that become part of a final, for-sale product.
Make a Two-Year Plan
Even if you ignored making a two-year plan at the outset, it’s never too late to create one. Take time to research your competition, study the general market for your company’s goods and services, and make reasonable estimates about income and expenses. Most founders happily discover that having a written, detailed plan helps them keep costs under control and notice when spending begins to veer out of control. Planning requires effort, but the work pays off in terms of lower overall costs.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
