When a company cuts costs, it usually means you can expect shoddier products and worse service. If you’ve ever been on a call with a bank or telecom provider after they had implemented a round of cuts and outsourcing, you may well have spent hours on hold, only to finally speak with a service employee who has no idea how to help you.

Every business, regardless of its size or customer base, can cut costs in an efficient manner – a way that leads to higher revenues and, crucially, excellent service.

It’s key to understand cost management from the start, and a good place to begin is with property. Space is a major expense and a prime target for cost trimming. To get a sense of how much space is enough, keep in mind that the standard is eleven cubic meters per employee.
Another great way to cut space costs is through hot-desking, it means to maximize workstations by eliminating individual desks and having employees use whichever one is available.

Now that you’ve maximized your space, it’s time to cut other non-essential costs, and that means outsourcing. Outsourcing will convert fixed costs into variable costs and will release capital for investment allowing businesses to avoid large expenses during the early stages of their evolution.

The world of business can be loud and busy. So busy in fact that it’s easy to get overwhelmed by the noise of it all. The one thing that you can be sure of hearing above all the noise is the word profit. Chances are you started your business to fulfill a purpose, a vision, a dream. But to keep doing that, your business needs to make a profit. The good news is that you can work out how fast your business can turn a profit very easily by using the working capital cycle formula. Never heard of the working capital cycle formula? The working capital cycle formula enables you to measure how fast your business can turn its current assets into money in the bank (your working capital cycle). It’s a magic trick that lets you to see into the future. A finance crystal ball, if you will.

Another way to cut variable costs is to increase productivity, but that means convincing your employees to get more done – and we all know this is no easy task. Luckily there’s a great strategy for boosting productivity, and it all relies on motivating your staff through your profit margins instead of their turnover; this gets you on the same side as your employees while increasing your own profits. But money isn’t enough. Chancing upon the right combination of monetary and non-monetary rewards is a challenge for many businesses. Despite a generally strong desire for flexibility, continued development, and recognition, timely gifts and pay rises can also boost job satisfaction and loyalty, particularly among specific cultures and for some personalities. The ultimate way to reward an employee is to know their strengths, weaknesses, and preferred means of expressing gratitude. Matching up rewards with personal needs is the ultimate aim for managers, but it all begins with setting clear rules and procedures about the type of behaviour and work an organisation deems worthy of reward.

The final strategy is to negotiate with banks for more favourable terms. But to do so you need both the necessary know-how and a business plan. In the end, banks are subject to the same macroeconomic factors and pressure to turn a profit as you are, so it’s wise to seek out a bank that’s in good financial condition, as they’ll be able to offer you a better rate.

To sum it all up…
A long-term expense-reduction strategy is actually essential to boosting the profit margins of any company. Managing costs effectively will also help you build a business that is prepared to face any crisis.