Cost control is one of the best ways to keep your business in shape so it continues to perform well in a variety of economic environments. These four suggestions for reducing overhead expenses can provide a good framework.
1. Keep contracts fresh
If your business is anything like most other enterprises these days, you likely work with a variety of third-party vendors. These contracts are a great place to look for long-term cost control measures. Consider re-opening contracts to bidding on an annual basis.
2. Build stronger relationships with suppliers
Another important step in controlling costs is to be diligent about staying on top of your expenses. Putting off payments until the last minute or past the scheduled due date will only exacerbate costs in the long run. These practices are also likely to damage the relationships you have with your suppliers.
Instead, the best approach is to pay your invoices as early as possible. Another potential benefit: Organizations that enjoy good relationships with their suppliers may also have more leverage when it comes time to negotiate.
3. Utilize cloud computing
Technology has advanced in such a way that your employees can be just as productive as ever — and perhaps, even more so — by relying on cloud-based servers to access data and utilize software. As more people telecommute and collaborate with colleagues in different regions, cloud computing is fast becoming one of the best ways for organizations to enhance efficiency and reduce overhead costs. The cloud provides round-the-clock access to business data, and financial Software-as-a-Service programs can give firms greater flexibility.
4. Hire the right people
Bad hires are expensive: According to research from Robert Half, 41 percent of hiring managers and human resources professionals believe their firms are losing out on thousands of dollars whenever the employees they hire don't work out. In addition, chief financial officers, on average, devote nearly one day a week managing lackluster employees. Bad hires can also have a negative impact on team morale and productivity. That's why taking a careful approach to all steps in the hiring process — from recruitment to onboarding — is one of the most important cost control measures.
Even if you have a dedicated finance team who understands the cost accounting process, actually identifying the most effective ways to reduce spending can be challenging. The four simple strategies outlined above are good first steps toward achieving cost control. (Consider these five suggestions for taking a fresh approach to controlling costs for your business, as well.)