There are times when businesses can get away with some waste. Things such as missed unnecessary fees on monthly bills or extra costs associated with supplies are fairly common, but they can add up to significant sums. When consumer spending declines and costs increase, it is increasingly important to stop these leaks. Consider the following strategies to help cut wasteful spending and improve your company’s bottom line.
1. Limit Employee Discretionary Spending
When employees do not need authorization for discretionary purchases, there are ample opportunities for waste. There is also little incentive to shop for better prices when you don’t have to justify your spending. So, if your employees are used to having free reign with company credit cards or supplier accounts, now is a good time to review that policy.
2. Review Monthly Bills for Errors
Billing errors are more common than you might realize, especially in utility spending, and they can easily add up to thousands of dollars per year if left unchecked. This is money you do not need to be spending. In small businesses, an owner or manager can easily perform this task each month. However, larger companies should consider implementing a utility management program to identify and resolve these errors.
It may help to look at it this way: If you billed one of your clients incorrectly, they would let you know. You would correct the error and possibly attempt to soothe ruffled feathers, maybe with a promotional product or special discount. There is no reason to expect your own suppliers and providers to act differently.
3. Find Lower Cost Supply Alternatives
This takes reviewing employee purchases beyond discretionary spending. Every company, regardless of its size, needs supplies. In most cases, it is easiest and most efficient to stick with the same company for typical needs. Many businesses have these set for automatic orders to streamline it even more. While this may reduce labor costs, any savings there are easily undone by higher item costs.
Spend a day or two shopping around for alternatives to your current suppliers. Once you get estimates, give the companies you currently work with a chance to match or beat the new prices. Explain that, even though you value the business relationship, you are trying to cut wasteful spending and that lower-cost alternatives to their products are available.
4. Outsource Non-Critical Roles
Reducing staff is never a popular decision. However, it is one that can save your company thousands of dollars every year. If finances are in a place where that money will make or break the outcome, it may be time to make the tough decision to let some employees go.
A more subtle approach is to avoid filling non-critical roles internally. Instead, consider bringing in contractors to fill these positions. Many companies also turn to staffing agencies to provide workers who are technically not employees. The route you choose will depend on factors such as what positions are open and how long you anticipate needing them filled.
5. Move to Zero-Based Budgeting
There are many approaches to building a corporate budget; one of those is zero-based budgeting. This approach begins with zero expenses and adds them in after a review of necessity. All supplies, payroll, and other expenses must be justified to make it into the final budget. This is a very different approach to simply modifying last year’s budget, but it is also an excellent opportunity for a fresh start.
Zero-based budgeting can be challenging, especially if your company has always been flexible with budgets. However, once adopted, it can save significant amounts of money while reducing waste. It is generally best to inform management and staff well ahead of this transition so they can prepare for it.
Even small spending leaks can have a significant impact on a company’s bottom line. Using strategies such as reviewing bills for errors, reducing discretionary spending, and adopting a zero-balance budget can help reduce waste and improve a business’s financial outlook.
