There are several cost-reducing measures that your business can adopt today to increase your business’ bottom line and improve productivity. The important cost-reducing measures at the forefront of business operations that can directly impact your business’ costs are negotiating new contracts, taking advantage of opportunities by looking at alternative suppliers, having a sound inventory management system, decreasing your business’ source of suppliers and consolidating administrative costs with the use of the internet.
5 ways to cut costs in business and increase efficiency
1. Creating competition between suppliers
Reaching out to existing suppliers or talking to new suppliers may directly decrease your costs. By obtaining new bids from present sources who know that quotes and bids may also be submitted by competitors, you may be able to extract lower product pricing. Studies have shown that suppliers can become complacent without the motivation of other competitors. It is therefore important to periodically source new suppliers to keep pricing in check.
2. Reducing cost by changing suppliers
Changing suppliers is a proven way to reduce costs. Although this can often have risks involved, those risks can be managed. When choosing a new supplier ensure they provide consistent quality, provide adequate service and ensure there are safety nets in place to safeguard against price increases. When changing a supplier for key inventory, a buyer should carefully check look into the supplier’s background and check that its operations are satisfactory to your business’ needs.
3. Efficient inventory management systems
Having a sound inventory management system directly affects a business’ costs. Reducing the amount of inventory by ordering just in time or holding minimal reserves of safety stock saves cash flow that can be better used elsewhere, such as in marketing or business development. Inventory management leads to less over stocking and reduces the chances of obsolete stock that cannot easily be sold. When you have efficient inventory management you are directly creating efficiency with automated ordering and systems that tell your staff exactly where inventory is. This is especially useful in your warehouse, saving your business space, time and money.
4. Eliminating multiple sources of suppliers
Reducing costs can be achieved by choosing single sources for items that are absolutely necessary. This can create economies of scale, because you are ordering from one supplier and generally at a reduced cost. This also creates rooms for lower overheads by reducing administrative costs, particularly due to eliminating multiple transactions from accounting activities. Ensure that there are back up suppliers, however, to create an ‘insurance policy’ when or if a supplier cannot fulfil their duties.
5. Consolidation of administrative activities
The use of the iInternet can directly impact a business’ costs. The internet unlocks great opportunity by having systems in a cloud where they are accessible any time anywhere. In addition, the internet can be used to consolidating administrative activities by having automated practices and a central processing hub to reduce transactions costs, directly impacting on overheads. These all contribute to greater efficiency and directly reducing costs.
These cost-reducing measures help act as a blueprint for pin pointing where costs savings are to be made. Take advantage of the opportunities and strengths your business has to gain today by applying these proven measures to increase your business’ bottom line.