If you’re like most businesses, your expenses are likely out of control. No matter how much you try to scrimp and save, you just can’t seem to make ends meet.
What’s going on here?
Part of the explanation is simply the market. It’s challenging for most businesses to make money just because of how the financial system works. As always, there’s a small group of winners, and a vast number of individuals who aren’t.
However, it can also have to do with company management. Adopting the wrong practices, even accidentally, can lead to shrinking margins and low investment interest from angels.
So, what can you do about this sorry state of affairs? How do you get your business expenses under control?
Fortunately, the answer is simpler than you might think. This guide explains the primary strategies you can use, plus a few extra that you won’t read elsewhere.
Cut Subscription Cost
One of the best ways to get business expenses under control is to cut subscription costs. Reducing the amount of money automatically going out of the company account every month can be a powerful way to balance the books.
Subscriptions are often coming out of CEOs’ ears. Many business leaders sign up for every tool advertised to them, perhaps only using one or two in their operations regularly. While many of these services seem essential, they are only necessary if you actually use them.
Furthermore, if you have a tool you need but don’t want to spend so much on it, talk to the vendor. Often, they can offer discounts or remove non-essential services to cut costs.
Look At Your Expenses Closely
Another tactic is to look more closely at your expenses. Figuring out whether you’re spending unusual amounts of money in specific areas is an excellent way to cut down.
Most finance managers split company spending into various categories and analyse them individually. For example, they might use a marketing budget calculator to see how much they’re ploughing into activities like PPC and content creation.
Then, they ask whether the spending is justified in any of these departments. Often, they find waste or excessive spending that doesn’t help the business achieve its corporate objectives. Long-time companies often have significant bloat that prevents them from being more competitive across the industry.
Many times, supply costs are the issue. Companies are simply paying too much for inputs and services. When this happens, it usually means renegotiation or using a rival firm.
Implement An Expense Policy
Implementing an expense policy is another tactic you can use. Setting expectations for how you want people in the organisation to spend money is essential.
Expense policies always go hand-in-hand with delegation. The moment you start handing out senior roles where people have control of the finances, you need one.
The policy should cover all the usual elements, like meals, travel and office supplies. Furthermore, it should contain extras if your brand does something unusual.
The documentation should explain what is reimbursable, and what isn’t. The stricter you are about this, the less likely staff will be to abuse your system. Sure, employees shouldn’t pay for business flights. But, at the same time, you don’t want them charging your business credit card with items from the duty-free shop.
If anyone breaks the expense policy, make an example of them. Show colleagues what happens when they overstep the mark.
Implement ERP for Cost Efficiency
When you’re looking to reduce your expenses and increase your bottom line, efficiency is essential across the board. Not only does this apply to your operational efficiency, but the efficiency of your costs too. ERP systems are essential in business and utilizing them will provide you with many benefits.
ERP services are software systems specifically aimed at helping businesses to revolutionize their operations. The idea here is to cetralize everything and streamline processes for greater efficiency. By looking to options such as NetSuite ERP implementation services, your organization will be able to streamline your core processes, increase profitability, and drive compliance. As such, you’ll be able to ensure expenses are as streamlined as possible across a wide range of business areas and allow for a better profit margin across the board.
Eliminate Non-Core Functions
Getting expenses under control sometimes also includes eliminating non-core functions. Outsourcing everything that you don’t naturally want to do can boost productivity enormously.
When you look at your business in more detail, you will notice that you have numerous non-core functions that you perform in-house. And while your employees may look productive from the outside, usually they aren’t.
Because of this, it is cheaper and better to work with agencies on almost everything. For example, you could outsource your marketing to an SEO company or get a facilities manager to care for your site instead of employing someone directly.
Once you start outsourcing en masse, you should notice that focusing on the core aspects of your business becomes more straightforward. You’re no longer dealing with random issues or spinning plates. Someone else is taking care of things for you.
Just ensure that whatever services you use are supportive and flexible. You want partners who can scale with you as your brand grows.
Monitor Entertainment Spending
Simply monitoring entertainment spending is another excellent way to get business expenses under control. This particularly applies to companies with people who travel to various destinations frequently.
Set specific guidelines on how much employees should spend on flights, transfers, hotels, and meals. Don’t write them a blank check so they can enjoy caviar in the finest restaurants (unless that’s part of your employee relations policy).
If you have cashback on your business credit card, use that too. Over time, you can often build substantial savings that reduce the overall cost of travel substantially.
Of course, if you’re still having trouble reining in spending, you could rethink in-person meetings. Maybe it is better to get colleagues talking over the internet than in person.
Negotiate New Contracts With Vendors
If you have relationships with suppliers, it may also be time to renegotiate your agreements and deals with them. This approach can reduce rates, improve terms, and encourage them to treat you better long-term.
Sometimes, changing contracts with vendors seems impossible. Brands often feel as if they have the best deal already.
But economic realities can change quickly. Suddenly, the price of something can go down quickly, increasing your leverage and allowing you to ask for a better deal.
Furthermore, you may discover that competing brands are offering better deals. These situations let you ask your existing vendor for a reasonable price or switch if they refuse.
Reduce Overhead
The most obvious way to cut business expenses, of course, is to reduce overheads. But how do you do that?
One of the most effective methods is to rethink how you do the office. Most companies get into long leases with landlords but these days, that’s no longer necessary. It’s now possible to simply rent the space you need flexibly and get third-party operators to throw in everything you need, like the internet.
Another method is to invest in energy-saving. These push back against growing electricity and gas costs, allowing your company to remain competitive, even as others put up their costs.
Asking staff to work from home is often the ultimate cash-saving scheme. While these setups don’t suit every company, they do reduce the need for physical facilities investment at many knowledge companies.
Use Tracking Software
The use of tracking software is also becoming more popular as a way to get business expenses under control. It’s helpful because it shows where money is going unequivocally and holds everyone accountable.
These days, the market is bursting with expense tracking and budgeting software. There are just so many options.
For example, Zoho Expense has become more popular in recent years because of its ability to categorise spending in real-time.
QuickBooks is also helpful because of its massive range of accounting integrations. Most companies can get away with using the platform exclusively (and nothing else).
What’s nice about these tools is that they come with automatic alerts to detect overspending. The software can forward information to managers and other senior staff members in the finance team if something seems out of place.
Often, these alerts are simply tracking the effects of inflation. Prices for specific inputs can rise, often overnight. But they can also detect more nefarious activities, including employees committing fraud.
Once you integrate tracking software with accounting tools, it makes it even more straightforward to streamline everything. You no longer need to perform checks and calculations manually- the software does it all for you.
Establish Your Budget
Finally, it pays to be realistic about your budget and what you need to spend money on to keep the business going. Many entrepreneurs like to map out their expected expenses and revenue for the year ahead because it tells them whether the business is viable.
For example, let’s say you write down all your projected expenses and the figure comes out to £20,000. You can factor in your revenues and ask how much you need to sell to break even or make a profit.
Without going through this exercise, you might wrongly believe a specific business plan could work. However, when you write down the numbers, you often discover otherwise, forcing you to change something.
Many companies invest in complex forecasting models to check they are spending effectively. Future demand can vary significantly, depending on the assumptions you make.
Ultimately, reducing business expenses is a matter of leadership. The more you can control your operations, the lower they are likely to fall.
Just be careful not to cut everything. Businesses still require spending to remain profitable and competitive long-term. If you starve your company of investment, the best people will leave and you will lose market position.
