Dealing with ups and downs is part of doing business. Now and then, there may be unexpected expenses or equipment break-downs or just low sales. You may find that you need to cut costs. Your first thought may be to reduce the number of your employees; however, that may not be the most cost-effective strategy.
When you make drastic staff cuts, it could lead to reduced productivity, which can lead to decreased profits and slower growth. Not to mention, your business may struggle longer because you have a hard time replacing your skilled employees when business picks up again.
Here are some alternative cost control strategies to consider:
- Reevaluate your inventory and supplies costs. Examine the cost of supplies and materials. Do you have too much material in stock? Is it possible to have your suppliers ship certain products directly to your customers? Review your suppliers to make sure you are getting the best quality and service at the lowest costs. Ask about volume purchase discounts.
- Analyze your facility costs. If you own expensive office facilities, you might consider moving to a less expensive location that you can still retain your business traffic. If you can’t move, you might consider sharing your space with a compatible business. The cost saving will go towards your bottom line and ease your budget.
- Consider a sale-leaseback arrangement for your business. This will allow your business to generate operational funds and transfer the ownership burden to the buyer, from whom you rent back the work space.
- Consider outsourcing. Certain things tend to take a lot of time and resources or may be prone to errors. Outsourcing may be good option for things like the business payroll. You may find that outsourcing certain tasks are more cost effective for the business.
At Summit CPA we offer multiple resources to assist you with cost saving strategies for your business. If you need help contact our office at (866) 497-9761 to schedule an appointment with our advisors.