Six Ways To Cut Business Costs


In times of financial crisis, every business needs to focus on cutting costs, just to stay afloat. Here are the top six ways any business can make reductions in expenditure, without reducing the quality of product or service the business offers its customers.

1 – Reduce Employee Costs

Even if your business is not looking to reduce the number of staff, there are ways of reducing staffing costs during lean business times. Offering overtime to individual employees means you pay that employee up to twice their usual hourly rate.

Rather than pay overtime rates, try re-organising the work rosters and routines to prevent the need for overtime. Perhaps some staff members would prefer to start earlier in the day and others to work later in the afternoon, allowing coverage during all opening hours, without the overtime costs.

Another way of reducing labour costs is to offer staff incentives for reducing their personal days and sick leave taken. Each time a staff member is sick, you need to replace the employee, either by offering another employee overtime, or by working a shift down and reducing productivity. Either way, sick days and personal leave add costs to the company.

Some companies have successfully introduced a reward scheme for employees who do not take any sick days in a year or six-month period. The cost of the reward is minimal compared to the savings made by the company.

2 – Increase Safety

Safety is one area where an increase in initial spending can cut overheads dramatically. Think about all the costs, direct and indirect, involved in an injury in your workplace. These costs include:

  • Medical costs;
  • Increased insurance costs;
  • Loss of productivity while the injured worker is taken care of;
  • Resources and time to investigate cause of injury;
  • Shift coverage and loss time for injured worker;
  • Decrease in employee morale;
  • Loss of company’s reputation and public relations costs; and
  • In some cases, fines and court costs from government authorities.



Therefore, increasing safety measures and preventing injuries in the first place will cut costs for the business.

3 – Review Procedures and Ensure Efficiency

This is a good time to review all your procedures and work processes to trim the fat. Is your team double handling a particular task? Can you reduce the amount of photocopying and therefore save paper and toner costs? Can you encourage employees to reduce printing by saving electronic files rather than hard copy files? Are there other processes that have become redundant but employees are still spending time completing them? Is there a more efficient method of completing the task?

Look at where you can save someone’s time or resources that the company pays for. Consider saving energy by turning off office lights at night and only having the office cleaned every two days instead of daily. Working more efficiently saves valuable resources.

4 – Reduce Damage to Equipment

Damage to equipment affects business expenditure in two ways. Firstly, damage reduces productivity while the repairs take place. Depending on the importance of the piece of damaged equipment to the overall process, this could put a whole factory floor out of production for some time. Secondly, damage to equipment costs to repair in labour, time and parts.

Ensuring that employees follow processes to prevent damage to equipment can add up to huge cost savings for the company in the long term. Regular checks and maintenance of equipment can replace worn parts before more serious and costly damage occurs.

5 – Shop Around for Suppliers

Make sure you are getting the best deal for essential supplies for your business. You may need to invest some time to shopping around but the cost savings can be enormous.

For example, if you can buy the same quality of paper for the office cheaper by just 50 cents per ream, how much could your business save over a year? If your business purchases just 100 reams of paper in a month, you would save $600 a year. If you made this kind of saving on every product you purchase by switching suppliers, you could add up substantial cost savings over a year.

Obviously, this kind of saving does operate on economies of scale and the larger business will achieve greater savings, but any business can save by switching suppliers to cheaper options.

6 – Staff Incentives for Cost Cutting

Some companies are offering employees a share in the cost savings made over a specific period. This encourages and motivates staff to work more efficiently, reduce injuries, damage and to participate in reducing costs themselves, rather than leaving it all up to the managers.

For example, if your employees can reduce costs by $10,000 a month for six months, your company will save $60,000. If you give even 50 per cent of that back to the employees in staff incentives and bonuses, your business will still save $30,000 in six months. Offering staff a share of 25 or 10 per cent of the cost savings would give your company even more benefits, while still encouraging the staff to reduce expenditure on behalf of the business.

There are many other ways of reducing expenditure by the business. Every cost saving you can make, gives the company more profit and reduces the impact of the global financial crisis. Cutting costs now can ensure the business survives the tough times and is still viable when the economy improves.


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