Tuesday, November 2, 2021

5 tips to reduce operating costs in your business

 There are two ways to increase a company's profitability: increasing revenue from products/services or reducing operating costs. Important to say that the two can be complementary!

 Therefore, in this post we are going to focus on cost reduction and the first important point is that you should not think about reducing operational costs only when the organization gets into difficulties. On the contrary, this control needs to be done as a means of prevention and financial organization.

 Therefore, cost reduction is directly linked to the efficiency of the production process and should be done as long as it does not affect the quality of the products/services and, consequently, the results. Today we have separated 5 ways to reduce expenses without compromising the quality of the company. Good reading!


 How to reduce operating costs in the company


 1. Discover and eliminate waste points


 Map processes so that cuts are critical to business performance. Thus, analyze from the supply chain to the delivery of products/services. Here it is also important to think about basic practices such as energy, telephone and water. Does your company use energy efficient light bulbs and is there an awareness of employees regarding energy use? Are ventilation and air conditioners turned off when there is no one else in the room? Is the use of water made consciously? Points of waste can be found in the product production process, in the service delivery process, or in the employees' culture with respect to equity. Small changes in habits can generate savings for the company!


 2. Re-evaluate supplier contracts


 If the company works with exclusive suppliers, it may be a good alternative to get in touch with others to negotiate more attractive values ​​and goods. Also, if you operate with several of them, strengthen the relationship so that you can obtain more competitive prices in exchange for exclusivity. Another tip is to add an expected service level clause in the contract, so that there is a quality guarantee or fine/compensation in the absence of it.

 Read also: Auditors in Dubai


 3. Set goals


 To reduce resources it is necessary to have effective processes, so that teams and each employee operate to achieve the requested results. To do this, define performance indicators that present characteristics of each function or department. Evaluate the workflow and find ways to measure its efficiency, which could be:

 ·         productive x unproductive hours of teams;

·         number of calls made;

·         time spent per client and per displacement;

·         average fuel consumption expenditure x driven kilometers.


 4. Automate and outsource processes


 You can purchase an integrated management software to control everything from cash flow, accounts payable and receivable, to others. With this, you will be able to have a global vision of what is happening in the company. Consequently, it will identify opportunities or fix issues that are affecting the profit margin.

 In addition, cut extremely manual processes that can be done faster and smarter, automated or outsourced. Your company needs to focus on the core business . Anything that is not directly linked to this can be outsourced.


 5. Engage the team in cost reduction


 An organization that invests in training its employees is more likely to implement new technologies, obtain more engagement and strengthen the organizational culture . After all, more prepared professionals are motivated, avoid rework, reduce waste, as well as turnover.

 Therefore, when reducing operating costs of your business, it is essential to carry out strategic monitoring through success indicators , in order to find out to what extent the reduction is being beneficial. In this way, it will be able to offer more competitive prices to consumers, more efficient production and optimized management.

 Now, if you found this article interesting, how about reading one more about what you need to know before open a business?

 

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