4 Tips For Reducing Your Operational Costs
/What are operating costs? Operating costs are the costs needed for the everyday maintenance and administration of a business. Some people refer to them as operational expenditure, expenses, or even OPEX. Examples of such costs include labour (i.e., payroll), sales commissions, employee benefits (i.e., health insurance, pensions etc.), maintenance costs, depreciation and amortisation.
If you want your business to go above and beyond other competitors, you should aim to reduce your operating costs. This is because reducing them will increase the amount of capital your business generates. Note, however, reducing your operational costs should not come at the expense of your employees (do not make their lives more difficult) and the quality of whatever you are selling. So, getting the balance or ratio right between reducing operating costs while maintaining a high standard of care for employees and your product or service is essential. This article aims to highlight some of the ways you can reduce your operational costs.
1. Take advantage of technology
Many software programs can automate your business functions. The systems can often tackle and help manage a range of functions from operations, accounting to marketing and payroll. There are many automation tools to choose from, which not only save time, but increase profits too.
The great advantage of technology is that it can boost a business’ efficiency through the reduction of operating costs. In the case of technology, the operating cost that can significantly be reduced is that of human labour. So, using machines that can do the job of a human faster and more efficiently would be extremely advantageous for your business. For example, implementing software tools in your business can improve how efficiently tasks are completed, and contract lifecycle management software is a prime example of that.
2. Switch to solar power
Believe it or not, switching to solar power can help save your business money, especially in the long term. You may have reservations about solar power, but fear not, as solar power has the potential to produce many positive outcomes for your company.
Solar power is sustainable and less environmentally damaging than traditional fossil fuels. So, it is a cost-effective energy alternative for business owners.
It will save you money in energy bills. Data suggests that an average commercial property owner in America could lessen total energy costs by 75% percent if they switched to solar. Therefore, using solar power has the potential to be a huge money-saving strategy for your company.
In the long term, your business will be receiving free electricity essentially. This is because once you have invested in the initial technology required to generate solar power (i.e., solar panels), there is little to no other costs associated. So, in theory, once you have paid off the cost of the panels, your business will be generating super low-cost electricity for years. Also, if you invest in high-quality solar energy from companies such as Custom Solar and Leisure, then you will receive a solar system with a long warranty that will last you decades.
So, while switching to solar power may seem scary, it does not have to be. This is because switching will produce an array of positive effects for the company and the environment as it does not release any greenhouse gas emissions. Yes, the initial investment may be high, but in the long term, it will definitely be more than its worth and can contribute largely to reducing operating costs.
3. Outsource some business tasks
Another way to reduce operating costs is by outsourcing specific business practices and tasks (e.g., legal tasks, marketing, consulting and accounting) to third-party specialists. This is advantageous, of course, because since they are specialists in their field, they will be able to perform and carry out the tasks in a swift and effective manner. This will reduce operating costs as you will spend less time, money and resources performing a specific task that you or an employee is less skilled at. Instead, your money will be well spent since the task can be completed well and in less time.
So, for example, if you find that your company is spending far too much time and resources on marketing to a point where money is not being made, or at least sufficient amounts of it (i.e., there is no return on investment), then it is probably in your best interest to outsource these tasks to professionals.
A good idea to start reducing the operating costs of your business is, therefore, to do some research into your business and evaluate it to find areas of improvement and strengths in terms of efficiency. Doing so will allow you to identify the processes and procedures that need to be more efficient. Increased efficiency will in turn, result in the reduction of operating costs.
4. Go green
Similar to the second tip, going green can save your company a lot of money. Switching to solar is just one option out of many. Going green can take shape in many different ways. For example:
Your business can use natural materials - Using materials such as wood, plants and natural sunlight as opposed to plastic, artificial plants and artificial light will likely save your business a lot of money.
Your business can replace current equipment with more energy-efficient versions - For example, using LED bulbs rather than the standard incandescent light bulbs. The advantage of LED light bulbs is that they use less power and last longer. So, in the long-term, they are most cost-effective. Importantly, your business does not have to change or replace every piece of equipment, as that would be costly and inefficient. But rather, the point and emphasis here is that making even seemingly minor changes, such as the type of light bulbs you use, can save a lot of money in the long term.
Go paperless where possible - Where you can, try to reduce the amount of paper your business uses and relies on. So, for example, if your business produces paper leaflets or contacts customers through the post, try switching to more eco-friendly options. You could even simply switch the primary communicating method to email or text, which will save a lot of paper and money, as well as the environment.
