Increase Profitability, Reduce Expenses

The less you spend in your small business, the better your bottom line. There are many approaches you can take to achieve a smaller outlay of cash in your business. This is more important than ever with higher wages, benefits, inflation, and rising prices. It can be done by eliminating fat and changing some business practices. Below are some suggestions on ways to reduce expenses, thereby easing up on cash flow demands.

Keep employee turnover to a minimum. It is very expensive to replace a valued employee. In addition to costs of recruiting and training, losing your best people can mean losing your reliable winners, innovators, and problem solvers.

Reduce your debt. Don’t spend your hard-earned money on interest.  

Evaluate your banks and credit card companies. Are you paying the least necessary in fees, charges, and interest? 

Get discounts by paying early. Some vendors will offer discounts for early payment. 

Use artificial intelligence (AI) when possible. AI adds efficiency, and you can reduce expenses by having fewer employees. 

When possible, use independent contractors instead of employees. This can result in substantial cost savings. 

Replace carefully selected paid advertising with free social media advertising. 

Evaluate your cell phone plan. Is it the best plan for your small business? 

Reduce dues by canceling memberships to organizations you don’t participate in. 

Cancel subscriptions to periodicals, magazines, apps, and various other services you don’t avail yourself of.  

Review insurance policies. Don’t over insure. Consider having higher deductibles, this typically saves money in the long term even if you need to make a claim. Work with your insurance agent to assess your coverage and to make changes. 

Convert to electric as you replace vehicles. It’s good for the environment and your cashflow. Check for tax incentives for electric vehicles at all levels of government. 

Change from incandescent light bulbs to LED bulbs. They cost more than 80% less to run. 

Change your thermostat. Consider adjusting it by a couple of degrees during working hours and definitely adjust it by several degrees during nonwork hours. This can result in significant savings. 

Turn off equipment during nonwork hours. You will save on electricity by turning off computers and other equipment when they are not in use. 

Buy supplies discounted through sales or buying clubs. 

Have meetings virtually whenever possible and save on business travel. 

Barter when possible. Exchange your goods and services for goods and services you need. Keep in mind that the goods and services you receive in bartering are taxable. 

Keep to deadlines to avoid penalties. Pay bills and renew licenses on time. 

Negotiate the terms of your lease. Your landlord may reduce your rent or change other terms to keep you as a tenant. If permitted, sublease unused space.  

Limit your inventory and increase turns. This will likely reduce warehousing and financing costs and help with cashflow.  

Take advantage of tax breaks. Talk to your accountant to see if this can apply to you. 

Different businesses can cut costs in different ways. Essentially all businesses can do something to bring their expenses down. Increase your small business’s profitability by reducing expenses where possible. Remember, a lot of little things can add up to a significant change to your business.

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