Cost cutting measures dovetail with the modern business trend of optimizing and streamlining important activities and processes. However, reducing expenses and overheads should never be the end goal if it has a detrimental impact on quality. Fortunately, the rise of digital tools, and new and exciting tech, has made it easier than ever before for modern enterprises to cut costs, without sacrificing anything in the process. In fact, many of the methods outlined here can actually improve the quality of your products and services.
Cutting costs is usually an activity driven by several factors, including the need to meet more stringent financial targets, to drive profits, and price products at a rate that will be competitive in the current market. However, the process doesn’t have to involve negative actions, such as laying off employees or producing inferior goods. Cost cutting can be used as a means to build a new cost-focused culture. It can benefit everyone across the business.
Reduce operational costs
The accumulation of unchecked operational costs can contribute to considerable annual expenditure. This is arguably the easiest step to cost cutting as you can get started straight away. Begin by auditing core expenses ranging from internet and phone, to electricity and utilities, and perform an in-depth cash flow analysis. Go through each of these expenses and ask yourself whether they really add value or benefit the business. Once you have cut out expenses that are not required, focus on reducing outlay for the rest. For example, internet is vital for a digital enterprise, but are there are any cheaper packages available with special rates for SMEs? You could also establish a green energy culture to lower the costs of air conditioning, heating, and lighting.
Outsource B2B management
Using business-to-business managed services can reduce costs by 40 percent annually according to recent data. B2B transactions are vital for sourcing materials for production processes, for supporting operational activities, and reselling goods, but managing the complexities of these operations day by day can be extremely challenging for an enterprise. B2B managed services are basically an outsourced solution that will engage an experienced partner to manage your B2B integration operations, so you can focus on what you do best. You could also outsource other business processes, such as content marketing, administrative tasks, bookkeeping, and payroll management.
Explore trade deals
Exploring trading and services relationships with other businesses can also benefit both parties. A trade deal for shutters, for example, would benefit interior designers, developers, and other professionals. Take a closer look at the terms of all your business relationships. You may be able to negotiate lower rates for products, bulk buying discounts, or free shipping, if you have been loyal to a vendor or supplier for a significant period of time. Retailers can also cut out the middleman by negotiating with a manufacturer directly, which can increase profit margins.
Adopt cloud computing
The Annual Trends in Cloud Computing report by COMPTIA found the use of hosted internet services are primarily being used by large, medium, and small enterprises, due to their ability to cut costs and reduce capital expenditure.
“Cloud offerings can deliver cost efficiency, but they can also simplify workflow, speed up operations, introduce new features, or lead to new business products/services”, InformationWeek exec, Seth Robinson explains.
Rather than investing in physical, on-site infrastructure that is expensive to install and maintain, you can instead access a staggering number of online tools via the cloud for a relatively small subscription fee. These tools are flexible and scalable so you can ramp up services depending on demand, and employees will be able to access them across various devices. You can also use the cloud to reduce overhead costs, as employees will be able to work more effectively from remote locations.
Enterprises that have deployed successful digital transformation strategies will be able to take advantage of new opportunities to streamline core processes and drive productivity. Artificial intelligence (AI), robotic process automation (RPA), and machine learning, are all maturing, and are set to have a profound impact on the wider business world during the next decade. All these tools are generally focused on replacing manual human effort with digital machine labor. It is easy to see how automated software can potentially provide huge cost savings for an enterprise. For example, you could use RPA software to extract payroll information from a range of written and digital documents, and enter it into a system for processing rather than relying on employees to manually enter data, which can cause delays and lead to errors.
Other cost cutting strategies can involve renting retail space, reducing shipping costs by optimizing dimensional weight, and adopting a social media focused marketing campaign rather than using traditional print. In fact, it is possible to streamline and optimize every department of business in some form, and the benefits can go beyond cost savings. It can drive efficiency and improve productivity, and generally make your business leaner and more agile.