3 Great techniques for saving money in business💰
Those who own a business should constantly be looking at how to save money 💸, without creating a negative impact on the short, medium and long term potential for your company. As you grow, it can be very easy to lose control of costs which eats directly into your profitability. No matter how large or small your business, there are ways and means of saving money.
We are here with 3 great techniques ✨ to help you do just that! ✅
- Lower staffing costs
- Save money on office expenses
- Save money with suppliers
When looking for a business loan, the tighter your costs and greater your profitability, the more chance of being successful. We will now take a look at three areas in which you can save money for your business, improve efficiency, enhance profitability as well as keeping all your staff happy! 👏
How to save money on staffing costs
As soon as you mention reduced staffing costs, many people automatically think of redundancies 😥, causing a lot of stress for your personnel.
But this is not the only way to look at reducing staffing costs.
Typically, the direct and indirect cost of employees tends to be around 60% to 70% of total business expenditure. For many businesses, it is recruitment which can be very expensive as well as time-consuming.
Ways to reduce staffing costs include:
- Revisiting previous applicants 📝
- Cross-train your staff 💪
- Staff referral scheme ✅
Let’s go into these in more detail…
Revisiting previous applicants 📝
During previous recruitment drives, it is likely that some applicants had all of the skills and experience required but missed out narrowly on being successful. Starting the recruitment process from the beginning time and time again is very expensive. Whether you go for direct advertising or through recruitment agencies, there is a cost with no guarantee of finding the right people. So, while many people promise this, make sure you keep a list of unsuccessful applicants who narrowly missed out on previous recruitment drives. In the future they could be exactly what you’re looking for!
Cross-train your staff 💪
While there is a degree of expenditure in the early days, cross training your staff can prove extremely lucrative in the long term. It is actually a win-win for the employee and the employer, as your employee can add this to their CV, list of skills and experience. More importantly, cross training your employees in different areas of the business and activities, provides important cover at “normal rates”. Bringing in outside parties as cover for specialist employees is not only a risk that you get the right person, it is often extremely expensive.
Staff referral scheme ✅
Bringing in an unknown party as a potential employee carries a degree of risk. While you will have a CV and feedback from their previous employers, references, etc., the relationship is starting at the beginning. Now, if you were to introduce a staff referral scheme this means that the individuals applying would already have knowledge of your business and your working practices. A huge bonus! 👏
Existing members of staff will also be able to let them know what is required, so before applying, they have an understanding of how you work and you have an understanding of what they can offer. Offering a financial or gift 🎁 incentive to employees that refer successful applicants for future job roles can lead to huge cost and time savings. This is before we even consider wasted training expenses for those new employees that simply don’t work out.
How to save money on office expenses
One other area of business which attracts significant expense is the running of offices. We have seen significant changes in this area in recent years but there are still many ways and means of saving money on office expenses.
Ways to save money on office expenses:
- Bulk buy stationary ✏️
- Go paperless 💻
- Work from home 🏠
Let’s go into these in more detail…
Bulk buy stationary ✏️
Whether you’re talking about pens, printers, printer cartridges or any other office expense, there can be significant cost savings if you buy in bulk. We are not suggesting buying office equipment in huge numbers, just enough to secure useful savings. It is not only the cost of the individual items that should be taken into account but also postal charges. However, in some circumstances, buying office stationery in bulk could impact your short-term cash flow. It is therefore important to balance the benefits of long-term savings against potentially short-term cash flow issues.
Going paperless 💻
Many businesses have the intention of going paperless but that final push can be difficult. Some employees prefer to read physical documents as opposed to on-screen files. In many cases, the equipment required to go paperless is already there and it is more a case of training staff to accommodate the switch.
Going forward, it seems almost inevitable that businesses which do not accommodate the new “paperless office” will be subjected to additional charges. Whether this is additional taxes from the government or additional charges from suppliers, we are certainly moving in that direction. So, in many ways going paperless is a win-win situation in the short, medium and longer term.
Working from home 🏠
For many years now we have been told that working from home will be the new norm going forward. This together with flexible working hours was supposed to deliver a greater work/life balance. As a business, allowing your employees to work from home gives up a degree of control, which can be difficult. However, there are numerous software packages which can be used to monitor off-site working to ensure that employees are still as efficient and productive as you would hope. Introducing flexible working hours for those working from home has also shown to improve efficiency, productivity and employee morale.
While there may be an initial investment required in time and money, and possibly training as well, the potential long-term cost savings could be huge. Certainly worth considering!
How to save money with suppliers
Aside from staffing costs, many businesses will buy-in regular materials or products which are then used to manufacture goods or provide different services. Thankfully, there are a number of ways in which you can look to save money with your suppliers.
Ways to save money with suppliers:
- Credit terms 💳
- Cash payments 💵
- Shop about for suppliers 🛒
Let’s go into these in more detail…
Credit terms 💳
This is something of a double-edged sword because many suppliers will offer credit terms while also accommodating cash payments. In many circumstances, if you are able to secure credit terms of say 30 days with your supplier this could prove extremely beneficial for your cash flow. There is the opportunity to sell your goods and services before you have even paid your supplier. This may stop you dipping into an overdraft, with obvious expenses, and can free up cash flow which you can use in different areas of your business. As all areas of business become more and more competitive, you may be surprised how receptive your suppliers are to offering or extending credit terms.
Cash payments 💵
Many businesses work on relatively thin margins, and any savings will drop into the bottom line to improve profitability. If your business is awash with cash, and bank interest rates are relatively low, it may be worth looking at cash payments for suppliers. We know that cash is King for any business, having liquid funds immediately available can reduce financial pressure as well as bad debts. The knowledge that your suppliers will often prefer cash/immediate payment means you may be able to negotiate a discount. But is it really worth it?
If we look at a situation where you spend $1 million a year with suppliers, and your business is cash flow positive, a discount for immediate payment could be significant. For example, a 1% discount over the year equates to $10,000, a 2% discount $20,000 and so on. This is effectively money for nothing because you are still buying the same goods from the same supplier.
Shop about for suppliers 🛒
Akin to individuals staying with the same house and car insurance providers, many businesses are guilty of similar failings. While sometimes it is a case of “better the devil you know” with regards to the quality of goods and services, these are competitive times. You may be surprised at the number of other companies offering similar goods and services at a reduced price.
In a worst-case scenario, you may be able to obtain a quote from another supplier and then go back to your original supplier. If they are keen to keep your business, there is every chance they will match an alternative offer or at least improve your current terms. So, potentially, for no change in the quality of materials and goods acquired, you could secure some significant cost savings.
Applying for a business loan
No matter your circumstances, if you can demonstrate to a loan provider that your business is being run efficiently with one eye on short, medium and long term cost savings, you stand more chance of securing a business loan. The suggestions above on how to save money just scratch the surface of the potential. In isolation, individual recommendations may seem “minor” but the cumulative impact can be significant. Imagine if you were able to reduce your annual business expenses by 10%, this is a saving which would drop straight into your bottom line, money in your pocket. 💰
Conclusion
The concept of saving money as a business and as an individual is very similar. Firstly, it is important to look at potential short, medium and long term cost savings. Secondly, in isolation these savings may look relatively small but the cumulative impact of numerous changes can be significant. For many businesses, these savings can be secured without any negative impact on their operations; services/goods provided or staff morale. Whether you are a large business with a finance department, or a sole trader, there is ever increasing pressure on business expenditure and running costs. While not all of these strategies and ideas will be relevant, many deserve at least consideration. Ultimately, if/when your business requires additional funding, the more efficient your operation, the more chance of securing financial assistance.
