For the past few years, companies have been cutting costs aggressively to maintain healthy profits in a slow-moving economy. This is for everyone, from the biggest multinational conglomerate to the small pizza shop on the corner.
When money’s tight business owners are smart to find ways to lower costs, but the question is always what is wise to cut and what is a vital investment in a company’s future. How do you prioritize? Here is our list of 3 expenses that should be cut and 4 that should never be touched – and why.
3 Expenses to Trim
1. Paper and Ink
More and more businesses are going paperless, but it’s hard to break the habit. Look into ways to convert your processes from paper-based to digital-based. Train yourself to get used to looking at documents on-screen and back away from the idea that you have to file away documents that are just taking up physical space. Look into online data storage. Send contracts or quotes to clients using online services. You can even have clients sign digital documents using popular services like RightSignature. When you do need to print paperwork, cut costs by refilling used ink cartridges (easily done at nearby office-supply stores) and using double-sided printouts.
2. Credit Expenses
The easiest expense to trim is interest rates on business line of credits, loans, and credit cards. A new business card with introductory 0% APR on balance transfers can help cut down on interest costs. Additionally, the cash back rewards that these cards offer make them even more valuable. For other financing options, to keep interest rates relatively low, look into periodically renegotiating with your lender.
People are any business’s greatest asset, but we’ve all experienced times when people feel like a business’s greatest liability. For most positions, as small business owner, you’re in the driver’s seat during this slow economy. Keep close tabs on who is adding value and who is taking it away, and make sure the people you have are keeping you on the track to growth.
4 Expenses Not to Trim
Safety is important for any business, whether we’re talking virtual or physical. Threats of fraud and theft will never go away, so it’s important to invest in protecting your business. Trying to cut costs in this area will put your company at undue risk and end up costing a lot more in the long run if a bad guy strikes.
Getting paid should be a top priority since cash flow is critical to the survival of small businesses. Invest in an easy to use accounting program like FreshBooks, that’s designed especially for small business. Since it’s easy it will save you time, keep you organized and ensure you are being paid on time. With the day to day organization under control, go ahead and invest in a great accountant to assist with the really important accounting things such as complicated tax preparation, tax law compliance, and strategic planning.
3. Advertising and Marketing
If you cut your advertising budget, you will most likely cut sales. Advertising is a key investment in your company’s future, so cutbacks in your ads could mean a step back in your business growth. Rather than thinking about cutting back your advertising budget, evaluate whether where you put your ad dollars is being put to most-efficient use, and make adjustments when necessary. Referral programs are relatively inexpensive compared to traditional advertising methods. If your customers are happy campers, consider ramping up a program that makes it much easier for customers to refer people in their network to you.
Again, businesses are people, and you need to make sure you have the best people in your company. While the job market is competitive, pushing your best people too far could turn them into your worst people – or worse yet, turn them into your competition’s newest hire. Good performance needs to be rewarded, because that will translate into good performance in the future.