Cost control is a primary operational and strategic objective for most businesses. With cost control, businesses can increase their profitability, which is always a goal. Businesses can look at their actual costs versus their budget expectations, and make decisions based on that comparison.
While cost control is essential for any business, there’s not always a clear idea of how to implement strategies that will really cut costs will ensuring the business can still operate in a viable way.
The following are some strategies and tools that can be used to cut costs realistically, without cutting out key functions of the business.
Use Expense Management Software
A huge expense for a lot of larger businesses is related to T&E. T&E spending can and almost always does go over budget when businesses don’t have centralized visibility into what’s being spent and where.
There tends to be a lack of clarity on the part of employees regarding spending policies, and rather than having T&E strategies driving revenue, the results are often quite the opposite.
Expense software is a good place to start to control costs of T&E, and also see where spending is happening, and what the ROI for that spending is. When businesses are considering the implementation of expense software, they should look for a tool that will allow them to automate key processes, but maintain a sense of control to reduce costs efficiently and effectively.
Create a Sense of Supplier Competition
Another place where there’s a lot of excess spending happening in businesses and not a lot of visibility is with suppliers. It’s important for businesses to maintain the necessary data to renegotiate with suppliers on a regular basis, and also to create a sense of competition among them.
You want your suppliers to know that you are regularly pricing things out, you know what the market looks like, and you’re willing to go with the competition if you’re not getting the prices you need.
Businesses will often get into a place of comfort with their suppliers, and not think about the potential to save money simply by doing a little research on a regular basis.
Along with that, signing short supplier contracts is often a good way to control costs as well. If you’re signing long-term supplier contracts, it can seem like you’re saving money, but when you break it all down, you’re probably not. Plus, you want to have the ability to review other quotes and renegotiate at least annually.
Move to the Cloud
Despite the widespread availability of cloud services that can be used to manage nearly every aspect of a business, there are still untapped options for a lot of businesses.
Using cloud-based software can cut down on the cost of everything from maintaining hardware, to overhead costs for employees because these services give them more opportunities to work remotely.
Cloud computing improves operational efficiency and also provides access to business data that can be used to extrapolate key insights and drive numbers-based decisions.
Focus on Employee Recruitment
The costs of turnover in business are financially high, but there are other ways turnover affects business as well. When the wrong employees are brought on board, there can be problems with productivity and engagement. When employees are regularly leaving it can take a toll on culture, and all in all, it costs businesses a lot of money when they don’t hire the right people.
To cut costs, businesses should think about investing more in recruiting and onboarding upfront. Then, while the costs might initially be higher, the ROI for these recruiting efforts is likely to be higher as well.
Know Where You’re Spending the Most
Finally, if you want to implement cost control strategies strategically, you need to sit down and take a hard look at where you’re spending the most. For example, is the majority of your spending going toward payroll, or is it rent? Maybe it’s capital costs. Whatever it is, you can’t make any decisions without seeing the numbers. A lot of organizations are surprised to find out the places where they’re spending the most.
Once you know the numbers, you can make specific decisions. For example, maybe you don’t buy equipment you don’t need, or that you can lease instead. Maybe you renegotiate your lease or decide to move.
The most important thing is to start with gaining insight into your business before you implement any new cost control strategies. Too often businesses will start with something that seems the most obvious—for example, they’ll lay people off if they want to control costs, but ultimately this can cost more in the long run if it’s not done based on data and insights.