Improving your bottom line isn't just about increasing your revenue but also comes down to reducing outgoings where you can. Reducing direct costs can dramatically increase your profit on each sale while eliminating unnecessary business overhead. Here are some things to consider for optimizing operational costs.
Reducing what you pay for raw materials, components or employees who work directly on output will have a significant impact on optimizing your costs. This assumes of course that you can maintain the quality and service your customers expect. List your direct costs from the most to the least, select the top ten and then see if you can:
At times it's possible to lower your overhead while still operating effectively. Similar to reducing purchases, rank your most expensive costs in order and then start working your way down, applying cost-saving tactics in areas where you'll see the most reward.
You can try:
Implement online accounting software to monitor your budget, track your payments and give visibility over your financials. Put robust systems in place that are checked frequently, such as using regular cash flow forecasts, implementing clear payment terms and a robust payments process using online banking so you can catch inefficiencies early.
Lean on the expertise of your accountant or business banker who can help keep you accountable to financial targets, highlight any areas of concern and give you systems and benchmarks to keep you on track. Regularly taking the time to review processes and activity within your business can help you reduce costs while still maintaining your brand integrity and the quality of your service.
Benchmarking your business against other similar companies may show that your performance is sub-standard. For example, your wastage levels might be higher than the industry average which is an opportunity to implement cost-saving solutions and to set goals.
Also, talk to your staff and get them involved in ways to cut costs. You might be surprised at some of their ideas. Give them an incentive to suggest cost-saving ideas and ask what causes them problems or wastes their time. Employees are more likely to cooperate with cost-control initiatives if you explain the reasons for changes and the benefits to the business.