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Cutting out unscientific operating expenses can reduce the productivity of businesses and therefore, the profits of businesses. While reducing any specific operating costs will often increase short-term profits, it can also affect the profitability of the business in the long run. The story of a business cutting its advertising costs, their short-term profitability, is likely to improve because they are spending less money on operating costs. However, by reducing advertising, businesses can also reduce the ability to generate new revenue and future profits may be affected.
Ideally, businesses should find ways to keep operating costs as low as possible while maintaining the ability to increase sales. In order to do this, managers need to understand operational costs and how to manage operating costs effectively.
1- Technology application
There are many online software systems and programs that can automate and streamline your business operations. These systems may cover a wide range of components, including accounting, payroll, marketing communications, customer interaction and management, service quality control and customer care, sale projections and operating budget estimates etc.
Technology is very useful because it promotes efficiency. The result of efficiency is reduced operating costs in areas where traditional managers often use direct labor as a habit. Technology works faster than people with fewer errors. Technology can also improve the efficiency of supply chain processes, looking for ways to reduce things like material costs.
To choose the type of technology or software service that's right for you, ask yourself the following questions:
- What am I good at? And I'm not good at anything? For example: If you are a person with knowledge and an accounting background, you probably won't need the financial accounting technology right away, but you might need the technology to market it. There is a very important point here: you tend to invest in technology with what you are mastering, for example, if you have a financial and accounting background, you invest heavily in technology. managing accounting and finance, because it makes it easy for you, while you should prioritize investing in what you are weakest to balance the strength of your business, such as media technology automatic marketing.
- What makes me find myself spending too much time each week?
- If I could eliminate one of my most time-consuming tasks, what would it be?
Your answers to these questions will give you a clear indication of the task or subject area that you should use technology for.
2- Outsourcing (Outsourcing)
Another option to improve efficiency is to outsource certain businesses to a third party expert. For example, if you have no background in accounting or tax laws, you may find it difficult to identify ways to manage your finances, or you cannot reduce taxes. Clearly trained experts in this field can assist you.
While it may seem like hiring an external provider will result in spending more money, in the long run, assigning specific tasks to experts in that field will save you money and create results. Better, because you can't train an expert on your own, it's hard to afford a real expert, while only the specialist can advise you on the best in each field.
Outsourcing certain activities is an investment in which you pay dividends gradually over time.
3- Search for better prices for the same product or service
If you work with suppliers often, you may want to set up a bidding rating system for your purchases. If you ask different suppliers to offer you the price, then you will choose the best price.
Make sure you specify the specification of the full product / service, the correct scope of work to request a quote for suppliers to bid, because information about your request is missing or when You add the complexity will significantly change the price.
Having an accurate quote can allow you to better plan for expected operating expenses.
4- Change the way of communication in the business
Renting an office, paying utility costs and managing a physical office can cost you a lot of money. Consider allowing your team to work remotely as a way to reduce overall costs.
Given the number of connections available today, the difference between an employee sitting in the office and sitting at home is almost imperceptible. Employees will often find this advantage because they can cut their travel time and costs.
To determine the cost and time loss of physical interaction face to face, do the following two things:
- Calculate the time your staff prepares, moves to get a face-to-face meeting, sometimes you will see a meeting that will take you and your team at least 1 to 2 hours to prepare. being relocated and relocated, and at a considerable cost.
- Make a list of activities that can communicate via Video call without having to "see a physical partner", then increase your online communication from 1%> 10%> 20% ... 30% but your job remains unchanged, even better, then the success of this job will surprise you because of its effectiveness.
5- Identify which areas of the business are not working
You should always find ways to make your business more efficient. By tightening your processes and procedures, you can reduce waste of money and time.
Encourage your staff to identify inefficiencies and suggest solutions to problems. Consider providing an incentive for employees to do so. Again, you can consider this as an investment in your company. A small reward for an employee that can ultimately save you hundreds of millions of dong.
6- Canceling unused services
7- Reassess the relationship between costs and results
The potential cost of the business is huge, you usually put it on a fixed schedule and assume that it is an expense that you have to pay.
Please use the corresponding Expense - Income report template (Not the expense - income statement of the company-wide financial statements) for each individual or department in the business, this will make each department unnecessary cost savings.
For example: When you look at the Sales - Earnings report of a salesperson, you see the costs of travel, telephone, and receptions incurred for 10 potential customers, but 10 potential customers. If there is no purchase, or a low purchase rate, or a small purchase value, then this is the area where you need to deal immediately with the efficiency of spending compared to the results generated. out, otherwise known as the Expense - Income Report.
The potential costs of business are so great, you often put it on a fixed schedule of activities and take it for granted as an expense that you have to pay. Please use the corresponding Expense - Income report template (Not the expense - income statement of the company-wide financial statements) for each individual or department in the business, this will make each department unnecessary cost savings.
For example: When you look at the Sales - Earnings report of a salesperson, you see the costs of travel, telephone, and receptions incurred for 10 potential customers, but 10 potential customers. If there is no purchase, or a low purchase rate, or a small purchase value, then this is the area where you need to deal immediately with the efficiency of spending compared to the results generated. out, otherwise known as the Expense - Income Report.
