Before you can save money in your company, you have to understand why you are in business and your objectives. Most people start a business out of necessity or a desire to run their own business in the industry of choice. However, the main objective of any business is to earn money.
Part of your money-saving plan for your company will have to include the evaluation of expenses. Many businesses that get in trouble are due to the owner having difficulty handling expenses properly. And this is a problem since it is critical to earn and save money.
To save money for your company, you need to understand all of your expenses and handle them. Ultimately, saving money in your company is more about money management and controlling costs than it has to do with how much your company generates in income.
While you want to continuously bring revenue into the company, you should be equally focused on saving money and controlling expenses. Many companies have a department dedicated to expenses within the company and recommend ways to save money.
There are different types of expenses within a company. Those costs that are the same month after month, such as a lease, are considered fixed costs because they will be constant and often the same. Fixed costs can include electricity, water, internet, rent, and payroll.
What can you do to save money here in fixed costs? The answer is almost nothing because most of the fixed costs are or commodities that have a low cost and resources on which your business depends and that if they are not well maintained, can affect your operation.
Therefore, you will need to find other ways to save money within these costs.
- You can save some money on services, such as water and electricity, if it does not take a long time or affect your service quality and operations. Either way, this will bring small savings for you.
- Try to reduce rental income only if your business does not depend on the location, as in restaurants, stores, or personal assistance services.
- Try to reduce the total cost of fixed employees. Here, the key is that you learn to differentiate which roles of your company are fundamental for your organization and which can become a variable cost, which you can hire through services to freelancers.
Other operations costs can also be looked at to save the company money. These are the necessary expenses directly associated with the product or service, and that can go up and down according to the production demand, your sales, or projects.
You can save by doing the following.
- Get discounts or suppliers that allow you a percentage of savings in raw material.
- Change one expensive material for another, as long as it does not affect the quality of the product.
- Have better inventory management, decreasing the number of products that can be cold in your stock.
- Outsource services such as customer service or for specific activities that are demanded according to sales.
Saving money in your company and how you do it is not the same for every type of company. Some companies will find it more difficult. However, all companies can look at ways to save, such as through opportunity costs.
The opportunity cost is a way of measuring if we are doing what interests us. Measure what we could be doing instead of what we do (opportunities).
For example: if I have a women’s clothing store brand A, I lose the opportunity to sell brand B clothes. If I have my employees in a project, I lose the opportunity to work in another.
This can confuse the cost of execution, but the opportunity cost tells you that you are doing your best with your resources.
In this case, there are no specific tips. The director of the company has some practices to help him make decisions:
- Purchasing policy based on turnover based on sales
- Make decisions based on market share and product or service potential
- Management of human resources, considering the specialization and alternatives of outsourcing