A business start-up always needs capital investment to commence the business. After the business has been set up, there are some operating costs involved to run the business. These costs are incurred by the firm to stay in the business irrespective of profit or loss. Also known as overhead costs, these expenses include utilities, insurance, rent, salaries, office equipment, and office supplies. Due to inflation and growing competition in the market, businesses need to minimize these costs. The following measures can be taken to reduce the overall overhead costs.
- Go for self-insurance
Self-insurance is a way of setting aside a particular amount to cover a potential loss of a business. In self-insurance, you do not seek the services of an insurance company, rather you set aside a fixed amount from the capital to cover a loss or damage. There are many consulting firms that render these self-insurance services. The insurance and risk management services of Axxima are excellent in this regard. Setting aside a particular amount will greatly reduce the overhead cost.
- Lease the equipment
Instead of purchasing the equipment that costs a fortune, try to lease the equipment through easy rentals. You can lease the heavy machinery for 10 to 15 years and when the equipment has been fully utilized to its maximum capacity, you can either renew the rental agreement or buy a new one.
- Reduce the number of employees
You can combine the tasks of employees and assign those tasks to a limited number of employees. Of course, employees’ salaries cost a lot of money for a firm. You do not need employees for every separate task. Just delegate multiple tasks to fewer employees. In this way, they will do micro-management.
- Energy-saving working space
Try to go for energy saver bulbs. They will consume less power resulting in less utility bills. You can incorporate an eco-friendly environment by allowing sunshine inside the working space. Making large windows will allow natural light inside the working space, thereby reducing the expense of electricity.
Outsourcing greatly reduces the full-time wages and salary payrolls of full-time employees. You can save a lot on office supplies as well. You can simply seek the services of an outside company to manage certain tasks. Nowadays, outsourcing helps to reduce overall overhead costs by large numbers.
- Hire an accountant
Accountants may feel like a huge responsibility but they will prove to be an excellent asset to your firm. You can hire an accountant who will make sure to reduce the costs incurred by the business in daily activities. The operating costs will be reduced when the accountant will look for cheaper alternatives for every task to be executed.
- Improve digital communication
Try to improve your communication with employees by sharing memos through emails. Keep the communication digital or in-person. Avoid using a lot of paper to send the message across. You can make WhatsApp groups or a huge email list to notify the employees about an upcoming event or a major change in the firm. Less usage of paper will lead to fewer overhead costs.