Operating expenses are rising for all types businesses; among these expenses are

Question

Operating expenses are rising for all types businesses; among these expenses are charges for equipment maintenance. Many of these costs are inflexible and required for the operation of a business. Upgrading equipment to energy-efficient models and taking advantage of equipment maintenance services is a proven way to reduce energy usage and therefore costs. However, the initial costs of these upgrades may be more than many small businesses can afford. Question to the class: What are some ways businesses can reduce operating expenses?

Explanation / Answer

Numerous small businesses work on tight budgets. This results in businesses looking for ways and means to reduce their operating costs without compromising on the quality of work or making lives of their employees difficult. The best ways to reduce the operational costs are: -

1.         Reduction of supply expenses – Money on the office supplies can be reduced by scouting for vendors and letting them know that you are looking for office supplies at the best cost. Look for vendors who give large discounts.

2.         Cutting on production costs – You should optimally use available resources. Track and measure the operational efficiency of all your resources. If you have more space than you can use, lease or rent your office space. Try selling unused and leftover paper, metals cardboard instead of recycling them. You can also consider getting some products out of waste material.

3.         Reducing Financial expenditure – You should always scout market for ways and means to cut costs on various things. You should compare and search for insurance providers who provide competitive rates on insurance. You can compare the costs with existing insurance provider. Try and consolidate all your bank accounts, credit cards and insurance policies. Evaluate all your insurances to check any over insured or duplicated policies. Do not take any unnecessary debts and do a thorough cost benefit analysis of your business

4.         Consider technology for marketing efforts – Instead of paying for advertising your products and services, look for technological alternatives for the same. Build a list of your customers and ask for referrals for marketing your products in their network. Build a strong network for yourself and try and generate business from existing client list. Increase the use of social media and building rapport with existing customers and asking to post your advertisements in their networks as well.

5.         Consider using technology instead of travelling – This is one of the best ways to reduce costs. You should start operating virtually. You can cut of travel expenses by conducting virtual meetings. Technology can be used to centralize the documents and paper documents of the company for product collaboration.

6.         Outsourcing – Concentrate on most effective business strategies and limit the types of services you offer. This will make you more productive and give high performance. Another way of maximizing business efforts is that rather than saying no to any business, you can try and outsource some part of the business to small vendors and concentrating on what you can do the best. This will generate more revenue for you.

7.         Maximize the skills of employees – Track and assess the usage of current human resource. People having more skills in their areas of capabilities should be given more responsibilities. Don’t give responsibilities without assessing skills like asking sales person do also do word processing.

With all these steps, you can reduce your costs without compromising on the quality of products or services provided by you.

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