Best cost reduction strategies for SMEs

Expense management is one of the crucial aspects of day-to-day business. If not done right, it can lead to a bloated business operation and financial challenges that can deplete your cash reserve. Fortunately, there are cost reduction strategies you can implement to regain control of your operating expenses and get your business back on track.

1.   Let go of unnecessary expenses

The backbone of an effective cost reduction strategy is thoroughly assessing your list of expenses. By tracking and reviewing your expenses, you may be surprised by the number of items you can either cross off the list or optimise for more savings. It could be forgotten software subscriptions or office supplies that are unnecessarily too expensive. You can even consider downsizing your office space or using a shared workspace. Once you get into the rhythm of regularly tracking your expenses, stick to it and make cost reduction and optimisation a core part of your business strategy.

2.   Enhance your negotiation skills

For the expenses that you can’t eliminate, try to check where you can further reduce costs by sharpening your negotiation skills and building a solid relationship with your suppliers. However, just be careful not to negotiate at the expense of quality. You can express commitment to long-term partnership or talk about bigger volume if you need it. Just always be polite in your dealings and avoid burning bridges.

3.   Consider hiring remote employees

By hiring remote workers, you can save on office space, equipment, and other overhead costs that full-time, office-based employees usually entail. The setup might affect real-time collaboration, but the cost savings can be enormous. You can also just consider a hybrid work model to get the best of both worlds. According to a recent report from Lemon.io, companies can save around $10,600 per remote worker annually. You can also outsource other non-core activities to freelancers and independent contractors and limit unnecessary fixed costs as much as possible.

4.   Reduce energy usage

Even tiny changes to the way your business consumes energy can translate to big savings. You can control your heating appropriately, avoid wasting heat by keeping doors and windows closed, use daylight sensors, and so on. Involve your staff in your cost reduction strategy and work towards embedding it into your company culture. Create an energy awareness campaign to help your team be on the same page.

5.   Encourage efficient time-management

Review your team’s productivity and find ways to make their shifts count. Poor productivity can be downright expensive. There are a lot of tools for tracking time and productivity. Don’t just haphazardly single out people for being inefficient though. Make sure that you’re actually giving them the tools they need to enhance productivity and set the right expectations to maintain morale. Empower your team by giving them the support and guidance they need.

6.   Maximise technology

The modern business landscape is filled with advanced technologies that can streamline processes like never before. From cloud computing to digital accounting to admin tasks, there’s a software tool for almost every core business activity under the sun. Maximise technology and let it take care of menial, repetitive tasks to free up more resources. You can also invest in more efficient and powerful tools and equipment to optimise your production.

7.   Get financing

If you need funding to invest in equipment, technology, or other cost reduction strategy, you can easily get access to business loans, grant sponsorships, and investors through Swoop. If your business is experiencing cash flow problems, Swoop can also get you the funding you need in no time.

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