In 2022, businesses will continue to adapt to changing conditions in the global marketplace. But as much as things change, certain operational fundamentals remain the same. Key among those fundamentals is the need to cut expenses wherever possible without compromising customer satisfaction and the quality of products or services offered.
There are numerous ways to reduce costs that can drain a small business of opportunities for growth. Here are valuable cost-savings tips to keep in mind:
1. Look at your “geographic income statement.”
During the pandemic, many businesses made the decision to reduce operations in multiple locations or eliminate them altogether. It’s a cost-cutting approach worth pursuing in 2022, as well.
The new year is a good time to perform a “geographic income statement,” pinpointing areas where budget cuts can be made. If your analysis determines that “one area regularly outperforms another, it might be time to shut down the underperformer and focus resources where they gain the highest ROI.”
A related cost-cutting measure aims at renegotiating the terms of corporate rental space. In a time when many businesses are opting for work-from-home measures, a landlord may be more willing to strike a rental bargain that keeps everyone happy.
2. Evaluate your company’s equipment needs.
Purchasing new business-related equipment every year may be a needless expense. Alternatives to this approach include (a) leasing equipment with agreements that cover maintenance, repairs, and upgrades; and (b) getting rid of outdated software or technology that no longer serves a useful purpose.
Also, this could be a good time to consider purchasing used equipment. “Not only will this save you money but used equipment does not depreciate as fast as new items,” notes Epos Now, a cloud technology firm. When it becomes imperative to upgrade equipment, “you won’t lose as much when it comes time to sell your tools.”
3. Huddle with your vendors.
Remember, your suppliers are as eager to keep business coming in as you are. Faced with the many uncertainties in today’s market, technology vendors and others may be willing to review existing contractual agreements in your favor.
For example, suggests Minority Business Development Agency, suppliers “may have quantity discounts of 50% or more depending on the terms.” It’s possible to “get anything from an interest-free loan in the form of vendor credit to a healthy discount for paying early.” But you have to ask.
4. Consider a different method of invoicing and customer payments.
Most businesses have already incorporated electronic invoicing as part of their green initiative efforts, but if not, 2022 is the time to do so. It might also be a good idea to inform your customers that you would like to begin collecting a percentage of cash up-front with each transaction. Consider sweetening the deal by offering a significant discount in purchase price when they agree to pay cash in advance.
Also, look again at the payment plans already in place for essential services, i.e., cloud computing, bookkeeping, payroll processing, and so on. “At least once a year, review your plans to see if the level of service you pay for matches your usage,” advises Zenefits. It might turn out “you can cut back on or eliminate [some services] without hurting your business.”
5. Take a deeper plunge into the gig economy.
Of course, you want a core group of skilled and talented employees working solely for your business. On the other hand, there may be considerable potential savings when you tap into the thriving gig economy, where freelancers are available for a broad array of services.
Remember, freelance contributors to your business (such as content producers, IT staff, accountants, etc.) don’t incur expenses related to PTO, insurance, or retirement benefits. Think of the potential cost benefits of relying on freelancers for key services.
2022 can be a year of growth, but also a time to spend more wisely than in the past. To learn more, register for our free TAB Boss webinar, “Expert Financial Advice to Address Challenges, Seize Opportunities, and Manage Cash Flow in the Covid-19 Era.”