Reducing Business Overheads to Combat Rising Costs

Reducing Business Overheads to Combat Rising Costs

The cost-of-living crisis isn’t just impacting domestic households.  Costs are rising across all areas from energy to raw materials and fuel, having a direct impact on business operations.  Keeping on top of the bottom line is proving difficult when forward-planning options are so limited.    

So just how can commercial enterprises maintain profits in the face of rapidly rising overheads?  

Complete a Financial Audit 

Much like balancing the books of a domestic household, the first step in reducing business overheads is to establish earnings vs overheads.  Take a look at every penny leaving your enterprise and categorise costs into essential and non-essential outgoings.

Performing a financial audit regularly helps to not only keep an eye on where costs can be increasing but also develops an understanding of the cost-creep that can occur with certain licensing or subscription fees.  Monthly subscription costs can often be deceptively small and don’t figure as being of major importance.  Try to factor in the cost in annual terms and look at how cancelling non-essential subscriptions could positively impact cost-savings.  

Don’t be Afraid to Renegotiate 

A successful business owner is never afraid to revisit supplier contracts.  Good suppliers will expect to justify their service and prices on a regular basis but not opening this out to competition can be disastrous in the long-term.  Whilst putting suppliers on notice can be a costly process depending on the type of contract or service to be renegotiated, regular bidding for contracts in private or public businesses should be the norm to retain quality as well as costs.  This is not only applicable to the supply chain but across all business operations from phone contracts to furniture to WIFI and utilities.  

Reduce Office Space

During the Covid pandemic, many businesses and organisations were opened up to the positive benefits of home working.  With the impact on productivity clear, it paved the way for businesses to reduce reliance on costly offices and identify ways to reduce commercial premises and increase remote working.  Whether by introducing a hybrid model of part-time office work or going fully remote, there is a huge impact on office costs.  Less space to rent and manage means less energy and travel costs which in turn will have an immediate reduction in facilities management costs.  

Create a Business Energy Strategy 

Facilities management costs can be reduced and managed even further by taking a more strategic approach to liaising with energy suppliers.  Choosing a utility company with more specific experience in delivering energy packages for commercial enterprises and organisations can be key.  A provider who has knowledge of your energy needs and the sector you operate in will offer greater freedom when it comes to negotiating and managing your energy costs.  

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The cost of hiring and retaining skilled employees can be substantial.  Switching to outsourced services can help to bring down overheads without necessarily reducing quality or productivity.  IT, financial, marketing and HR are all sector areas which have a thriving outsourcing market and can offer particularly good value for money.  Sector-specific consultants are often highly skilled in their chosen area.  Meaning you can tap into the extensive experience of a consultant on a limited or ad hoc basis to service the specific needs of your business.  This razor-sharp delivery-focus limits down time and supports work that is more accurate and efficiently completed.  

Employing someone with a similar level of skill could be particularly expensive from a salary point of view.  However, choosing the right consultant can help reduce recruitment costs, improve delivery and crucially, provide cost flexibility from an output vs time point of view.  

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