5 Ways to Cut Costs to Increase Profits

December 11, 2014 by Ed Becker

With the end of the year being so busy, many small business owners are stretched thin with holiday shopping and increased staff. Oftentimes this is the time of year when business owners’ attention to detail wanes. You aren’t looking at profit margins as closely because you’re doing higher volume sales. The harsh reality is that just because your sales increase that does not necessarily mean your profits will, too.

There are several actions you can take to cut costs and keep closer track of your bottom line. By taking a small amount of time to do some comparisons and review your monthly finances, you might find that you could cut costs significantly.

1. Fixed Monthly Expenses

Reducing your fixed monthly expenses can have a long-lasting effect. Go through every item, line by line, and see what is unnecessary, and then simply remove those expenses. Are you wasting money on things you really do not need or use? Get rid of them!
Next, look at items that you could possibly cut back on in order to reduce monthly spend. For example, for utilities, start seeing where you can reduce your energy usage. Are you paying for services you do not need such as excessive telephone or internet subscriptions and memberships?

2. Insurance

Check all of your insurance policies to ensure that you are not overspending for unnecessary coverage. If you are over-insured, it could be costing you a lot more than you realize. You also can shop around for better rates, then see if your company will match or beat them. Check your auto policies to make sure that your deductibles are set higher to reduce premiums, and that your worker’s comp rates are not inflated.

3. Office Equipment

Do have any equipment or other items that are not useful for the business?Do you have leased items that you could buy second hand?

If you have equipment that is leased and that you do use and need, you could renegotiate your lease, especially if it is with a long standing vendor. Another possibility is to reduce the item to something less costly that can still meet your needs.

4. Office Supplies

This is very often an expense that does not get monitored as closely as others. Shop around for the best prices, monitor usage and theft, lock the supply cabinet, and try to reuse supplies as much as possible. Make sure that you recycle, not only to be green but to save on your trash expenses.

• Use “trash” copies for scratch paper
• Always use both sides of note paper
• Purchase refilled ink for printers and faxes when possible
• Fax/e-mail rather than mail
• Mail rather than courier or UPS/FedEx
• Supply only the bare necessities for staff

5. Vendors/Suppliers

Long time suppliers may be willing to cut prices rather than lose your business altogether. Shop around and let your vendor know you have found something cheaper, and give them the opportunity to match or beat the lower price. Pay your invoices on time to obtain possible discounts and avoid penalties.

Keeping track of costs and finding where you can reduce them long-term will directly increase your profit margins. There almost always is something that you can reduce or remove from your overall cost of doing business. Start creating saving goals today!