How to reduce operating costs
Reducing operating costs
One of the best ways to increase your cash flow is to reduce the costs of running your business. Although these costs increase as your small business grows, there are still things you can do on a regular basis to keep your expenses to a minimum.
This guide looks at six tactics you can use to reduce your business overheads.
There could be a number of administrative tasks that would benefit from being outsourced, such as payroll. Not only can it be cheaper, but it also frees you up to spend more time growing your business. Here are a couple of examples of things you can outsource.
- Payroll - This is a complicated process and mistakes can be quite costly. So as tempting as it might be to manage it yourself, it’s often better to have professionals take on the task, since they understand the requirements.
- IT requirements - Keeping a permanent person on staff to look after IT issues is expensive and only really necessary if your business is IT-based. Outsourcing your IT means you’re only paying for it when you need the assistance.
2. Understanding business taxes
Although you’re probably working with an accountant who’ll file your tax payments and ensure you’re not paying too much, it’s still a good idea to have an understanding tax regulations and how business taxes work in order to try and reduce them.
If you’re not using an accountant, we can help when it comes to tax season. Scotiabank’s Government Tax Payment Service helps you to pay and file your Federal and Provincial business taxes online.
3. Reducing expenses
Almost all businesses must pay for phones, internet, energy, office equipment and rent. While these expenses are inevitable, there are ways to keep them to a minimum:
- Communications - Mobile phone and internet data plans for you and your staff can quickly add up to a lot of money. Thankfully, competition in the telecommunications marketplace is fierce as suppliers are eager to win or keep your business. Often, a telephone call to your supplier to request a review of your account is all it takes to find savings.
- Energy costs - Taking measures such as retrofitting lighting, turning off idle machinery, programming thermostats and buying green energy are a few helpful things to consider. It’s also important to shop around. For example, talk to other energy suppliers. There could be a better deal out there.
- Rent - Take a good look at your business. Could you eliminate the cost of renting a commercial location by utilizing an online space? If you’re not client-facing or retail-based, consider the work-from-home option. It’s a huge saving in rental costs.
Is it worth importing your business's raw materials? If you can’t lower the costs of goods that you sell by purchasing from an alternative supplier in your own country, research how much those same goods would cost if bought from overseas.
There are a number of considerations you’ll have to think about before you decide to import. There are added costs associated with importing such as tariffs, customs duties and storage. Exchange rate fluctuations will affect your bottom line, and finding a reliable supplier may not be so easy. Talk to us about importing, as we can help minimize the risks and identify ways to save you money.
5. Make the most of technology
This is one of the best ways to streamline processes and consequently, reduce costs. The better and more technology based your systems are, the more money you’ll save.
Technology is changing all the time, so it’s important to keep up with anything that’s relevant to your industry. Moving your accounts to a cloud-based system, reducing manual paperwork processes and communicating with your customers over Skype instead of visiting them face-to-face will all help reduce costs. You can even have your staff work from home and, as mentioned above, save on renting a commercial space.
Giving your customers up-to-date payment options is also a great way of improving your cash flow. Mobile and online payments mean you’ll see the money in your account faster. Talk to us about our Merchant Services and how we can help streamline your payment options.
6. Join industry associations
Associations often organize group discounts for their membership. With hundreds or thousands of members, an association can negotiate volume discounts with suppliers to secure rates that are beyond the buying power of individual businesses.
You could join an association representing your industry, school, profession, geographic region or your interests. Consider joining your local board of trade, or Chamber of Commerce, to access significant member benefits.
Conduct a thorough review of your business. Sit down with your employees and discuss ways you can reduce costs. Consider everything you’re spending money on, and come up with solutions to reduce those expenses using the above suggestions.
It’s also important not to rest on your laurels. Conduct regular reviews of your business expenses so you’re always thinking of ways to reduce costs and improve your cash flow.
- Speak with your Scotiabank Small Business Advisor about how we can help reduce your business expenses.
- Pay your taxes online with Scotiabank’s Government Tax Payment Service.
- Improve your cash flow by giving your customers multiple options to pay – Scotiabank’s Merchant Services have a range of payment options.