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March 14, 2023

5 Ways Businesses Can Cut Costs And Increase Profits

It’s a simple accounting equation: there are two ways to increase profits: cut your costs, increase your income, or do both! Assuming you're already doing everything in your power to make those sales, all that’s left to do is cut those costs. Doing so at the expense of productivity isn’t on the cards, but there are ways to slim down your expenses without too much hassle. See if these tips can fit your situation.

1. Outsource

It may seem economical to do everything in house, but is it really? Explore outsourcing opportunities. For example, IT technical support services place experts at your disposal so that you don’t have to struggle with unfamiliar tasks - and they can help you to boost your efficiency and get more done for less. With the right hardware and software working for you, you won’t fall into the trap of either over-investing or under-investing in the tech tools you need to get things done the smart way instead of the hard way!

Think about all the things you have to do to keep your business running but that don’t generate income. Then investigate outsourcing options. You may be surprised at the tasks you can outsource for less than it costs you to do them!

2. Review Your Suppliers

Supplier relationships are important, so switching suppliers is a big step that shouldn’t be taken lightly. However, if you can find reliable sources for the materials you need plus lower prices, you can use this information to negotiate with existing suppliers - and make the switch if they can’t offer you a better deal. Do test the waters before changing suppliers: you need reliability, consistent quality and good service. Without these, “cheaper” suppliers can actually end up costing you money!

3. Look for Activities That Cost You More Than They Earn

Sometimes, we do unnecessary things just because we’ve always done them. They don’t boost our sales, and they eat into our profits. Sometimes, one has to “cast one’s bread upon the waters” and see if there are benefits, and sometimes it's hard to measure returns, but if it looks like a waste of time, it probably is. See what happens if you eliminate steps in your processes that don’t really add value from your customers’ perspective.

4. Automate

Are your people spending a lot of time transferring tasks, following them up, or doing routine work that’s almost always the same? It’s time to automate tasks. That doesn’t necessarily mean replacing your people with machines. Most businesses run on processes and systems, and if a process is repeatable it can be managed with automation tools that pass on tasks, track progress, and facilitate communication and supervision. You’ll also be able to use these tools to spot bottlenecks in your systems and redirect resources to eliminate them.

5. Use Lean Principles

Lean manufacturing principles have neatly captured areas in which resources are often wasted. Even if your business isn’t involved in manufacturing, you can use the sources of waste its principles identify to use your resources more effectively. Your aims are to eliminate defects, prevent overproduction, eliminate waiting times, use skills to your business’s benefit, cut down on “motion” and “transportation” and eliminate extra processing that doesn’t add value.

Cutting costs may sound like a painful process, but if you get it right, you’ll have greater capacity, boosted efficiency, and lower costs. The most “painful” part is when you have to let go of cherished ideas that just aren’t working for you and that don’t add to utility and customer satisfaction. Let go of preconceived notions, get to know what your customers really want, and do nothing more, and nothing less!

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