Searching for business cost reduction ideas? We know how it feels to want the best for your business. Often, taking simple steps to reduce your expenses are all that’s needed to improve your business’ success.

When it comes to your business, boosting your profit margin can mean the difference between growth and stagnation.

Business Cost Reduction Ideas to Boost Your Net Profit Margin

When looking for potential business cost reduction ideas, the first step is to take stock of your existing expenses.

An expense review is simple enough to do, and you’d be surprised at how easy it is to identify any areas of overspend once you’ve completed one. Once you know what your expenses are, you can take steps to manage your resources better. This, in turn, helps you become more efficient at keeping costs down.

You should keep track of all your costs, including your cost of sales. However, it is usually easier to make efficiencies within your operating costs. These can include fixed costs, such as rent or loan repayments, and variable costs, such as labor.

Regardless of where you make your savings, the result will be a healthier net profit margin for your business. This is great for the business, as it creates more profit, and hopefully cash, which you can reinvest. Further, more profit also indicates a successful business and happy shareholders.

A pain-free way to track your business expenses is to create an expense spreadsheet. This can be used to track your costs in real-time.

How to make a simple expense spreadsheet

It doesn’t take long to create a simple expense spreadsheet for your business. As long as you have access to Excel or another spreadsheet tool, you can set up a budget for your business that allows for continued expense tracking.

At a minimum, you should have an expense spreadsheet that outlines your total expenses for each month of the year. If possible, it’s also a good idea to compare those expenses against what your budget was for that particular month, quarter, or year. This will let you see whether your expenses are on track.

A simple expense spreadsheet would have the following:

  • use the columns for each month of the year
  • use the rows for different expense categories
  • enter the amount spent on each expense per month within the relevant cell
  • total the cost of all expenses each month
  • total the overall cost of each expense line over the course of the year

If spreadsheets aren’t your thing, you can also choose to use a ready-made expense template, such as those from Microsoft. Such tables help you easily track your business’ expenses and let you know whether they are to budget.

Keep on top of costs

Reviewing your business expenses regularly will help you keep on top of them, and allow you to avoid any overspend before costs spiral out of control. This should result in a net profit margin in line with your business’ projections, or perhaps even a larger net profit margin than otherwise anticipated.

Once you’ve completed a full review of your outgoings, you can look at making efficiencies within specific areas. You can do this in many different ways, such as reducing your budget and overall spend, on a particular item. Also, negotiating a cheaper rate or cost, for example on rent or on raw materials for a product. Finally, removing some cost items entirely if they’re not useful or needed

Below we outline a few simple business cost reduction ideas that could save your business money in rent, utilities, and possibly wages.

Work smarter, not harder with a shortened work week

One very easy way to reduce business costs is to consider shortening your work force’s working week. Although it may seem counterintuitive at first, this method of working is gaining increasing popularity with businesses around the world.

In particular, Scandinavia appears to be paving the way, with workers in Denmark, Norway and Sweden reported to work just 31 hours on average per week or less. However, other European countries have notably followed suit, with the Netherlands enjoying one of the lowest average working weeks in the world, while remaining one of the world’s most productive workforces.

Germany also maintains its global reputation for efficiency, despite the fact that their workforce reportedly works just over 26 hours per week on average.

How to introduce a shortened work week

You can successfully implement a shortened working week in one of three ways. Firstly, you could reduce the number of hours staff work per day. For example, if your employees usually work from 9 am to 5 pm, then you could change working hours so that their day ends at, say, 3 pm.

Secondly, you may choose to change the number of days worked per week, so that staff only work four days, rather than the traditional five, per week. The third potential option would be to adopt a combination of options one and two. This could be achieved by giving your staff set flexible working hours per week, which they can work on the days and times that work best for them.

There are many benefits to introducing a shorter working week for your business. For example, your business can save on overheads, such as electricity and water, if your office is not staffed as often. If you pay your staff an hourly rate, you may also end up saving on wage costs if you reduce your staff’s weekly working hours.

Further, having a happier workforce can lead to more productive and efficient workers. In turn, this can contribute to increased output for your business.

Try telecommuting

Want more business cost reduction ideas? Then consider employing remote workers. A telecommuting workforce brings many benefits. Firstly, your business can enjoy a more diverse and international workforce than it may otherwise have been able to. Secondly, remote working allows for further cost savings to a business, compared to a more traditional workforce.

From a business’ perspective, having remote workers means that you save on certain overheads, particularly rent and utilities, as you should only need a smaller office space to accommodate staff.

Indeed, you could go so far as to adopt a fully remote workforce. This may even do away with the need for a business premise entirely. As rent, in particular, can be one of the largest fixed costs a business faces, any way you can reduce such expenses will only be of benefit to your bottom line.

However, if you do want to try out telecommuting for your business, you should make sure that you have adequate communication systems in place to enable your staff to keep in touch with each other. That includes a stable internet connection. There are a host of software programs that support remote working. Skype, Slack, Trello, and Dropbox are just a few low-cost examples that are easy to install and use.

Get to Work, Reduce Those Costs

Overall, there are some simple business cost reduction ideas that you can try today. Although not every business will be able to move towards a shortened work week or telecommuting, you can still save money in your business by regularly tracking your expenses against your budget.

If you understand where areas of overspend arise, you can take the necessary steps to get spending under control. This should result in a healthier net profit margin for your business.


Featured Image: CC by SA 2.0, Ken Teegardin, via Flickr