Operating costs or operating expenditures vary from one business to another. They include things like maintenance costs, labour, insurance, amortisation, sales commissions, etc. Regardless of your business's size, lowering operational costs will increase your profits and allow you to expand. Here are a few ways on how you can do that.
With technology comes efficiency. In business, embracing and incorporating technology will help reduce operational costs because it eradicates errors that more often than not cost your company money and time. A good example is robots; they work faster and have fewer errors compared to humans. ERP software also enables you to automate certain functions in your organisation and increase precision, therefore, reducing administrative and operational costs.
Small businesses and start-ups do not have large streams of revenue. So, outsourcing services from freelancers or third-party companies is a more economical option compared to hiring full-time employees. Marketing and advertising are some of the many services that can be better off done by a third-party company. As your business grows, you will find it necessary to hire full-time employees for all departments, but while your business is still developing, reducing costs is critical.
Find better rates
Before settling on a supplier, set up a bidding system for tenders and projects. Send a request for proposals with as much information as possible to the interested parties and compare prices. As you shop around for the cheapest rates, remember that cheap can be expensive, and therefore, never forego quality and value for discounted rates.
Telecommute or flexible working
Renting and managing an office space can be very expensive, so telecommuting is one of the best ways to reduce operational costs as your business grows. The Covid-19 pandemic has proven that working from home is possible and therefore, even after normalcy, you could consider continuing working remotely part-time or full-time. Tools such a Zoom, Skype and ERP software allow you to hold meetings, log information and adequately communicate with your team so that business goes on as usual.
Lower your production costs
In the manufacturing industry, one of the best ways to reduce costs within your business operations is to look at your production line. To find areas where you might be able to save money, you'll need to spend some time tracking your expenses and operational costs. To reduce production costs methods such as Just-In-Time can be introduced as this would avoid over-stocking your inventory. Other ideas include regularly inspecting the quality of your stock to avoid damage and partnering with a transport company who will help you transport stock from your supplier's location to your premises.
Pay invoices on time
Ensuring you pay invoices on time will save you money in two ways. Firstly you would not be charged penalties for late payments. The same applies to any loans that you have. The second advantage of paying your invoices on time is that vendors offer you discounts. A 2% discount may not seem like much at the time, but in the long term, it can add up.
To reduce costs within your business operations, focus on increasing efficiency. One way to do this is by investing in ERP software. It integrates all your business functions into one programme, therefore improving the management of operations. It also gives you more control over your inventory and supply chain, allowing you to minimise waste.
Reduce paper use
Reducing the printing footprint in your company will not only help reduce operation costs, but it will also make your company more environmentally friendly. You can do this by switching to digital. Store your files digitally and use electronic methods to communicate. We can all agree that using technology to run your company will increase efficiency and save you time and money. If you have any questions on ERP software, contact us today for more information.