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June 14, 2022 | Posted in:

Six Ways to Cut Costs in Your Business

Too often businesses emphasize increasing sales as the only way to boost profits. Cost-cutting, when done selectively and intelligently, can be a faster way to higher profits.

Here are six ways you can “trim the fat” in your business.

 

#1 Look at gross profit margins.

If the margin has been deteriorating, find out why. Are you passing direct cost increases along to the customer or not? Analyze individual products and services. Does it make sense to continue those with the lowest profit margins?

 

#2 Payroll costs are a major item.

Payroll-related costs are fertile areas for cost reduction. For example, review group insurance programs and solicit bids from different providers. Consider higher deductibles as a means to lower premiums.

 

#3 Review operating and supply costs.

Are all telephone calls necessary? Can money be saved by alternate shipping and receiving carriers? Can you negotiate costs of supplies, products or raw materials? Think carefully; maybe it’s time to switch suppliers.

 

#4 Review your customer mix.

Since 80% of revenues are typically generated by 20% of your customers it is wise to review the bottom tier. Ask: is it cost-effective to continue serving them?

 

#5 Analyze inventory.

Determine if any obsolete inventory can be reworked or sold.

 

#6 Solicit cost reduction ideas from employees.

Many companies have generated significant savings using this approach. To encourage participation, consider a bonus program based on a percentage of costs saved.

 

 

This article is from Alloy Silverstein’s Summer 2022 Client Alert newsletter. Download the full issue or subscriber to future enewsletters at our Publications page.

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