While the country is nearing a recession, it’s more important than ever to ensure you are doing your best in cutting costs in business and operating efficiently. There are plenty of ways to do that without impacting the company culture or making employees feel their work habits are hampered by some version of extreme couponing. It’s not only possible to cut costs and continue working as normal, but these cost reduction efforts can bring new light to company priorities. Such efforts may bring phrases like “work smarter, not harder” to life. Making smart and strategic cuts to your budget show employees that you are serious about using resources wisely. It will make them your partners in future cost reduction strategies and make them more conscious about using resources wisely too.
How to go about cutting costs in business? Here are 13 cost reduction initiatives for large companies to implement.
1. Review and question everything in your operational expenses
As part of strategic cost reduction, one mantra is “review and question everything.” Department heads should review line items in their budgets. Managers should do the same. Those with no direct reports should also be involved. Each process should be questioned, with an eye toward doing a better job with fewer resources, and that includes decreasing time commitments. Saving time is saving money, as employee hours can be allocated elsewhere, helping reshape personnel budgets and reduce unnecessary expenses.
Question whether recurring reports are not only useful, but worth the time spent on them, for example. Are there internal processes for handling anything from a phone call to a bill to an RFP process that could be shortened without affecting the outcome? Look at the exceptions processes to handle issues in various departments, considering more streamlined ways to handle them.
2. Automate tedious processes
As software gets better and artificial intelligence continues improving, manual tasks can often be performed through workflow automation. Not only does that save time, but the systems are sometimes more accurate than humans. Automation can be used to run reports, process payments, direct customers to the right person or even the right answer without needing human interaction, track timesheets, scan expenses and process expense sheets, generate invoices, collect information from contracts, collect orders and send them to fulfillment, order restocks when levels are low, collect invoices and route them to the right place…the list goes on.
3. Vendor contract negotiating
Each year, at a minimum, a business owner should reconsider vendor contracts to take into account what has changed, and where you can be cutting business expenses and operating costs. That includes negotiating contracts from food service to vending services to advertising to legal services. Any time a new vendor is needed, the company should solicit bids from three different vendors, ensuring they are getting the best value and so the vendors know to submit the best bid. Rubber stamping another year of service without going through the contract will not help with a cost reduction. Considering value, not cost, is important. A contract might cost more but if they provide a better overall value and operational efficiency, that may be a better deal and could represent overall savings.
4. Shipping contract negotiation
Some companies assume there is little they can do to negotiate their shipping contracts with carriers. Or they proudly announce they received a few discounts. The big carriers and the small ones have more wiggle room than you know. And this is a case when either outsourcing the negotiation or seeking a consultation will pay off. Shipware’s experts worked in-house at the major carriers for decades. We know what terms are open to negotiation and by how much. Shipware can offer contract analysis and advice on parcel contract negotiation, or we can do it for you. Either way, you’ll save more on this huge business expense than if you did it yourself.
5. Parcel audit and recovery
Parcel auditing and recovery is another place where automation pays off in spades. Trying to manually go through shipping invoices days or weeks after they come in, is overwhelming. And there’s no way a person could keep up and catch all the errors that carriers make in the process. Shipware offers a parcel audit service using our proprietary software. It can be set up within minutes and is a hands-off service for clients, saving personnel time and helping with cash flow. Each night the software performs its analysis, automatically identifying shipping charges eligible for refunds, and filing claims with the carrier. The refunds are applied to your account as credits, and Shipware only earns a fee when you are credited.
6. Have employees bring their own device
How to cut costs in business? Instead of doling out corporate cell phones, reimburse those who need them for work with a set fee. That fee will be lower than purchasing a company-owned device and maintaining cell phone plans. The employee can use that money to invest in a better-quality phone, pay for increased data or just apply it to the bill. The company saves a significant amount of money and is not responsible for capital expenditures and there’s no need to negotiate and manage contracts.
7. Re-evaluate underperforming personnel
When looking at HR cost reductions, there’s no need to ask departments to submit lists of people to lay off. Get smart about your cost reduction strategy, but understand who is underperforming and who is underemployed. Someone who is underperforming does not belong at your company, especially if they’ve been given warnings and have not improved. Employees need to understand that poor work performance won’t be tolerated. Those are people you can let go to save on employee costs.
In the past few years, you may already have made changes to increase operational efficiency. People who are underemployed may perform their original duties, even though some of the duties were moved to automated processes, or other changes in workflow design. Determine who has extra time and reorganize their job responsibilities. Perhaps they can perform a role that would provide greater benefit to the company’s bottom line, taking on projects in the pipeline or using them to fill an open position that can now be eliminated. Also consider whether some work responsibilities are better done by outsourcing, like paper shredding or janitorial services. These labor-intensive tasks can be given to outside companies, where you’re not paying salary and benefits.
8. Use independent contractors
Not everyone should be an employee. Independent contractors can be used for specialized needs on a short term or part time basis. For example, if you need someone to handle your social media and the position would only take a few hours a month, it might be better to go with someone whose business focuses just on social media management. You’ll be working with an expert, and can scale that commitment up or down depending on your needs and human resources cost, while cutting business expenses. Be sure to follow labor law when determining what circumstances qualify for independent contractor status.
9. Incentivize your staff
Consider changing your sales staff to a lower salary level and higher commission level. If they have skin in the game, they are more motivated to bring in sales. Institute a new policy where raises or bonuses are tied to individual performance and company performance. If the company meets its financial or other stated goals in a given year, everyone wins. These goals align individual incentives with company incentives.
10. Review past suggestions
In past discussions of how to reduce operating costs, a business owner might have shelved some great ideas because they weren’t feasible at the time. Circumstances may have changed, making some of these older cost saving ideas ripe for implementation.
11. Double down on real estate
Office life as we know it is changing as a result of COVID-19. Many companies are changing their office policies and allowing fewer people in at a time. This is not the time to increase your overhead costs and move to a larger space or even commit to a longer lease in the current space. Now is the time to consider cash flow and determine how to reconfigure current square footage to spread out desks, rather than maintain open meeting areas.
12. Consolidate purchasing
In a large company, office supplies and other individual purchases add up quickly. That includes association memberships, which can often be negotiated in bulk. Consider offering company-wide subscriptions to key publications instead of allowing departments or individuals to order and expense them on their own. Sometimes outside library vendors are worth their cost if they can negotiate and manage memberships and subscriptions, with better cost reduction opportunities.
Consolidate supply purchasing through a procurement department, rather than allowing each department or site to buy their own. By using fewer vendors, it’s easier to negotiate better prices and improve cash flow and operating expenses. With specialized software, the procurement department can gain greater visibility into stock on hand, shifting supplies between departments or sites, rather than just ordering more.
Lower the approval levels so that employees need permission to spend beyond a certain level. This can help control purchases and coordinate spending.
13. Print less
Becoming a paperless office space is hard for some, but messaging can be spread to show its importance in corporate culture. Starting at the top, consider how paper is used and wasted, and how it can be used more wisely. By printing less, paper and printer expenses decrease. Not only are ink and cartridge expenses high, but printer purchases and rentals are high too. Companies spend a lot on service agreements. Reducing printing will save money all around.
Cost Cutting Now, Significant Savings Later
Shipware can’t solve all cost cutting ideas for large companies, but we can help with a few cost saving ideas that provide instant and significant savings. Reach out to us for a free parcel audit consultation and to learn how much you can save.