If you are an entrepreneur or self employed, you will be very much aware that out of control overhead costs can make or mar your venture. You cannot make overheads nil, as some money needs to be spent to generate money. The issue is even more important for any startup that is trying to break even. In these tough economic conditions, when business is falling and resources are scarce, out of control overheads can lead to closure of business in a short span of time.
There are many elements to overhead costs, but the common ones are expenses for rent, office consumables, advertising, communication, traveling, uniform, stationery etc. These are there in every big or small set up, but they total up to a great amount over a year, and any saving in such expense is simply your added margin.
To cut costs is easier said than done. For the benefit of our readers we have listed here few ways to effectively cut down the overheads:
1. Work Paperless
Using no, or minimum, paper saves money as well as space. With the advent of cloud computing, businesses can store the documents in the cloud, sign documents electronically and use email to transact business communication. No paper means no ink cartridges, no filing cabinets, no staff spending time filing, no box files and above all no fell of trees. So, you shall save money and environment too; nothing can be better than this.
2. Deploy a Good Accountant
Employing an experienced accountant may cause spending a good amount of money, but it is worth it as this will save the business from committing costly errors in filing taxes. It ensures that the business keeps a close and timely watch on all money, incoming as well as outgoing. Good accounting practices including a good bookkeeper will ensure that payments are made on time without leading to penalties and interests. It also ensures that timely efforts are made to collect the pending payments from buyers. Proper accounting of all expenses shall ensure that they are correctly accounted while calculating the tax liability.
3. You must Know Your Needs
If you look around your office, there may be many things that you should not be paying for. Analyze critically and stop using the unwanted things like using business cards in this age of facebook and twitter, or opting for premium web hosting service when the work can be done with cheaper options.
The golden rule is that you should not be paying for anything that you do not need, be it office space, some office machinery or manpower.
4. Evaluate your Space Requirements
Evaluate your need of area and location of office space. Ask yourself if you wish to have office in a prime location or can shift to downtown where rentals are much lower. You may also shift to smaller office or may like to work from home in case you do not need to meet with clients face to face too often. The perfect fit to all these questions depends on the type of business, size of business and future plans. One thing is for sure; by careful planning of office space you can save a lot of money.
5. Control Communication Expenses
Communications are another major chunk of your overheads. You can cut down on these expenses by using VOIP services such as Skype or Google Voice. As these services are available on mobiles also, your staff can stay connected even on the move and at a cost that is a small fraction of the expenses of using conventional communication.
6. Control Staff
Hire all-rounders who can perform many functions. To employ persons with past experience helps you to utilize them productively immediately after employment. Spend money to train existing employees to develop multitasking abilities. This will keep employees happy, and you will have enough reason to give raise to existing employees for the extra functions performed. This will still work out to be simpler and cheaper compared to hiring different people for different jobs. When hiring your team, be sure to get people who have proven skills in the tasks you need; spending time training someone how to use a particular piece of software, or how to manage a system is just going to cost you money in their time and yours.
7. Control Contractors
Quite often, especially in the construction industry, subcontractors assure they will always have the work and often get “heavy handed” on their pricing. Especially in building, it’s wise to have a few subbies from each industry in order to keep them competitive and their pencils ‘sharp’ when it comes to pricing. They may not like it, but your profit levels will.
It is not possible to eliminate expenses, but they can be considerably reduced by working smart and by following the above suggestion, which are simple but highly effective. Every penny saved from overhead costs shall add to your net profit, something that is the need of these times when only the fittest will thrive.
About Donna Stone
Donna Stone is a published author of the very popular “Stepping Stones Series” – a trilogy of books containing over 750 business tips, available via https://donna-stone.com.au. Also a speaker and consultant in the bookkeeping industry. She won “Networker of the Year” for 2010, 2011 and 2012. Check out Money GemStones.Connect with her thru Facebook, Linkedin, Google+ and Twitter. Watch videos here.