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Every owner dreams of business success, but they know that this success does not come easily. No matter what business you run or what industry you operate in, you understand that success takes plenty of hard work and a careful financial eye. However, your finances may not always be as healthy as you’d like them to be, which could affect your company’s future.
So how can you improve your finances? You may need to reduce expenses, but this is not as straightforward as you’d like. You may feel the only option is to lay off staff, but this is not always beneficial, especially when you consider employee morale and you don’t want to put anyone’s livelihood at risk. The good news is that you don’t need to lay off employees. Instead, consider these ideas.
Understand the Difference Between Good and Bad Costs
Every business has good costs and bad costs. The trick is to understand the difference so that you don’t eliminate a cost that is beneficial for your business while leaving bad costs festering.
While sponsorships and other brand awareness approaches can increase interest, they do not always guarantee sales. On the other hand, your top salesperson may be able to bring in the sales that the sponsorship misses. In terms of good costs and bad costs, the salesperson qualifies as a positive influence on your business.
Of course, it is rarely that straightforward, so it is always worth weighing up your costs before making a decision.
Manage Expenses More Efficiently
As your business grows, you require more and more expenses which become more challenging to keep track of. You can get everything under control by going through every expense carefully. You may want to work with your finance team or consider an outsourcing firm to help you work out which expenses are damaging your company.
While many expenses are necessary, they still might be draining your accounts faster than you can keep up. One of the most common issues is scalable programs like your AWS spend, so it would benefit your business to see how to reduce this spending without impacting growth.
Negotiate Your Rates
Your business has many suppliers and other services that offer rates for the length of each contract. As many of these contracts run year-to-year, you mustn’t forget to negotiate the rates when the time comes.
If you have worked with a supplier for a long time, they may be willing to offer discounts or deals on specific products and materials. You can also look at supplies that you don’t use as much anymore. By understanding where you spend unnecessarily, you can cut down your supply expenses to make your finances more efficient and manageable.
Downsize Your Office
If the COVID pandemic taught business owners anything, it’s that the office is not as crucial as initially believed. While the office can generate a sense of camaraderie, it can also cost your business far too much, especially if you offer flexible and remote working opportunities.
Rather than require everyone to be in the office at all times, you can look at independent facilities that provide enough space for rostered employees. This means that only a few employees are there at any time and everyone else can complete their work from home without affecting productivity.
Consider Non-Essential Expenses
Every business has non-essential expenses that are often leftover from previous years. These expenses could include subscriptions or software, and there’s a strong chance they are no longer required.
Like efficient expenses, it’s worth checking your outgoings at the end of each month and tracing unfamiliar expenses to the source. You may discover these are essential expenses, but if they are not, feel free to discard them.
Offer Hours Adjustments
Hours adjustments are a sensitive subject as they can cause some disquiet amongst employees. You must approach this the right way to prevent panic, and if done well, it can be hugely beneficial without laying off your employees.
Some of your team may be at a point in their lives when they are happy to take reduced hours whether permanently or temporarily. They may be approaching retirement or need to be at home more for childcare. Their job is still there, but they do not need to work as much, giving them the best of both worlds.
Keeping the Team Together
Avoiding layoffs is one of the best things a manager can do. It is great for employee morale and it helps the team maintain the chemistry that has made you so successful. The next time you need to reduce costs, it will pay to look at other expenses to determine which services or operations you can do without.
