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Reducing Overheads

Reducing Overheads

Small is not just beautiful, it’s also economical. Keeping your overheads as small—or as limited—as you can without compromising on the quality of your output, functional efficiency or employee well-being, is quite the balancing act.  However, to stay viable and profitable, it is an art that small businesses would do well to master. Read on to learn about various business cost saving ideas that will enable you to reduce your overheads.

Review the previous year’s profit-and-loss statement

Get a sense of how your money was spent. Based on the actuals, you will be able to weigh various cost reduction ideas, which in turn will help you with cost improvement.

Actual or direct costs: These include production costs involved in things like procuring raw material, as well as employees’ salaries, and all expenses related to storage and distribution.

Indirect costs: These costs comprise rent, insurance, utilities, as well as the salaries of management, maintenance, and clerical staff.

See if there are expenses you can reduce. Utilities like electricity can eat up more than you realise. Use zero watt bulbs when possible, and make sure everyone shuts down their computers and turns off all the lights prior to leaving their desks or cubicles.

Keep your workforce small and flexible

Don’t cut critical corners: Don’t cut corners on salaries—you could end up with high attrition rates!—but keep your permanent workforce small. Having a small workforce makes skills-training and capacity-building workshops easier to afford. These opportunities will also expand and enrich employee skill-sets, while developing greater flexibility, which will then allow them to contribute to a broader variety of projects.

Your employees are at the heart of what you do, and they are truly your top priority. If you invest in them, they will not hesitate to invest time and energy in you and in the business.

Outsource when possible: There may be certain routine, basic tasks that have been eating up a lot of your and your employees’ time that could easily be outsourced; for example, to young people looking for internship experience. Many management and business programs allow students to choose internships as course electives. Contact some of your local universities and colleges to see if this option is available in your city.

How much office space do you really need?

Leo Tolstoy wrote a famous short story titled, How Much Land Does a Man Need? which studied humankind’s obsession with ownership and possession. Tolstoy muses that after all, in the end, the only land we really ‘possess’ for any sizeable period of time, is the ground in which we’re buried.

Along similar, but less stirring lines, we might ask ourselves, ‘how much office space does my business really require?’ It is possible to keep a low profile office space-wise, while saving money and allowing your work to speak for itself.

Keep ‘debtor days’ short

Debtor days refer to the number of days it takes, from the moment the invoice is released, for a customer to pay for services rendered. Experts recommend that you don’t exceed the 45-day mark, and settle payments expeditiously; which often hinges on good customer service.

Reducing Overheads



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