6 Best Practices for Reducing Your Operating Costs
All business owners know they need to keep a keen eye on operating expenses, especially during economically uncertain times. Even small savings can add up when it comes to boosting profit margins, and reducing operating costs is an effective way to keep those margins healthy.
But while it’s a relatively simple concept, it can be more difficult in practice to recognize where your costs are too high and where expenses can be trimmed. Here are six best practices for better understanding, managing, and reducing your operating costs.
1. Be Realistic
To reduce your operating costs, it’s important to be realistic about the needs of your business as well as the costs you can control. Things like material costs, rent, and utilities are largely out of your control.
2. Reduce Labor Costs
The biggest source of overhead in most businesses is people, and one mistake small companies make is thinking they need a full-time role to perform every job. That isn’t necessarily the case, and outsourcing non-core functions can provide you with quality work that puts less pressure on your bottom line.
3. Adopt Technology Wisely
Technology can help you automate many aspects of your business, replacing some manual tasks that would otherwise be performed by a person. Time saving is money saving, after all. But choosing the wrong software can be an expensive mistake. When it comes to investing in technology, it’s a good idea to adopt and optimize your accounting software first.
4. Price Your Services & Products Effectively
Negotiating with vendors is a good idea, but attempting to negotiate a price reduction is a long shot effort for most businesses and can strain relationships with those you may need favors from in the future. If you can, do so, but a more realistic strategy is to ensure that you are pricing your products and services to accurately reflect your overhead costs.
5. Monitor Expenses Carefully
This may sound basic, but costs can easily spiral if not monitored closely. Discretionary expenses like meals, travel, entertainment, and even office supplies can add up, and the extent to which you can write them off has decreased in recent years. Cost-saving efforts should be an ongoing process, with regular evaluations of your practices to identify both inefficiencies and opportunities for improvement.
6. Partner with an Accounting Team Who Knows Your Business
Outsourced accounting services can save you more than the cost of an in-house accounting department. It’s expertise you can leverage to keep all of your expenses in check, while positioning your company to grow and thrive.
Business Growth Strategies Customized for You
At Kirsch CPA Group, we take a holistic approach to your accounting needs. That means more than preparing financials and making sure your taxes are filed accurately and on time. It’s a strategic and forward-looking process aligned to help you meet your goals. It starts with a thorough understanding of your business, from your operating costs to your profitability to your long-term goals.
Speak with one of our team members today if you have questions about the best strategies for keeping operating costs under control as you grow.
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