7 Practical Ways to Cut Business Expenses

Running a business often feels like there’s never enough time or money. While cutting costs seems like an obvious solution to financial pressure, it can be tricky. You need to find ways to save money to keep your business healthy and fuel future growth, but slashing resources in the wrong places can actually hinder your success.

Not to worry, this article takes the guesswork out of cost-saving strategies. We’ve outlined 7 practical ways to tighten your purse strings without sacrificing quality or growth.

What Are Business Expenses?

Business expenses are the costs you incur to operate your business day-to-day, from keeping the lights on to paying your employees and marketing your products or services.

These expenses can be categorized into different areas, helping you track your spending and identify potential areas for savings. Here’s a breakdown of common business expense categories, along with some examples to illustrate each:

1. Fixed Costs: These are expenses that remain relatively constant from month to month, regardless of your business activity. Examples include:

• Rent or mortgage for your office space
• Salaries and wages for your employees
• Insurance premiums

2. Variable Costs: Unlike fixed costs, variable costs fluctuate based on your business activity. They typically increase as your sales or production levels rise. Examples include:

• Supplies for production
• Shipping costs for delivering your products to customers
• Commissions paid to salespeople based on their sales volume
• Inventory storage costs

It’s important to note that depending on how you operate your business, some expenses can fall under fixed or variable costs at different times.

Also, beyond this fixed vs. variable cost classification, expenses can also be categorized into operating and non-operating. Operating costs include expenses directly related to running your core business activities (employee salaries, marketing costs, etc.), while non-operating expenses cover spending not directly related to your core business activities (legal fees from a lawsuit, interest payments on loans, etc.).

7 Strategies for Cutting Business Expenses

1. Embrace Digital Transformation and New Technologies

Digital transformation isn’t just a buzzword; it’s a powerful tool for streamlining operations and saving money. By embracing new technologies, you can automate repetitive tasks, make key processes more efficient, avoid costly human error, and gain valuable insights to make smarter, cost-saving decisions.

For instance, inventory control software can track stock levels in real-time, preventing overstocking and stockouts. This reduces the need for large warehouse spaces and minimizes the risk of expired or damaged products.

AI-powered chatbots can handle basic customer inquiries 24/7, freeing up human agents for more complex issues. This translates to reduced staffing costs and improved customer satisfaction.

2. Renegotiate with Vendors

Don’t be afraid to revisit your existing contracts with vendors. Loyalty can be rewarding, but loyalty shouldn’t come at the expense of overpaying. Gather competitor quotes and use them as leverage to negotiate better rates for services like internet, office supplies, or shipping.

Before entering negotiations, be clear on your current spending with the vendor and your desired outcome. This will strengthen your position and increase your chances of success.

3. Review and Consolidate Subscriptions

In today’s digital age, it’s easy to accumulate subscriptions for various software and services. Take some time to review your monthly recurring charges and identify any subscriptions that are underutilized or redundant.

Consider consolidating services where possible or eliminating those that no longer provide value. One actionable step is to schedule a quarterly “subscription audit” to proactively manage these expenses.

4. Examine Marketing Costs and Get Creative

Marketing is essential for business growth, but traditional methods can be expensive. By taking a critical look at your marketing spend and exploring alternative strategies, you can significantly reduce costs without sacrificing reach.

Firstly, analyze the effectiveness of your current marketing efforts. Are expensive print ads or billboards generating a strong return on investment (ROI)? Consider reallocating those funds to content marketing, where creating valuable blog posts, social media content, or even infographics can attract and engage customers for a fraction of the cost.

Also, be open to thinking outside the box and trying out daring but cost-effective marketing tactics. For instance, until around 2022, when it spent $175,000 on ads, Tesla didn't have an advertising budget. It instead relied on word-of-mouth marketing, organic social media buzz often driven by CEO Elon Musk’s interactions, exciting product launches and events to drive brand awareness and sales.

5. Track Expenses Diligently

Knowledge is power, especially when it comes to your finances. Implement a system for tracking all your business expenses, categorizing them for easy analysis. Such diligent tracking can reveal hidden and unnecessary costs, which you can scrap.

Also, tracking your expenses can provide insights into your spending habits, which can help you allocate resources more strategically and avoid overspending in certain areas. Imagine knowing exactly how much you typically spend on office supplies each month, for instance. This allows you to set a clear budget for supplies, preventing unnecessary purchases that could strain your cash flow.

6. Prioritize Employee Wellness and Satisfaction

Happy employees are productive employees. Investing in employee wellness initiatives such as fitness programs or mental health resources can significantly reduce healthcare costs and absenteeism.

Also, satisfied employees are less likely to leave, saving the time and expense of recruitment and training. After all, replacing an employee can cost between one-half and twice the worker’s annual salary.

To boost employee satisfaction, consider offering flexible work arrangements or subsidized healthy lunches. These small investments can boost morale and create a loyal, engaged workforce.

7. Streamline Employee Expense Management

While implementing cost-saving measures often focuses on operational overheads and supplies, you shouldn’t overlook employee expenses. You need a well-defined process for managing and reviewing employee spending to uncover hidden costs and ensure responsible use of company funds.

Fortunately, innovative tools like Graph can streamline this process. You can issue corporate cards to employees and automatically track all their business-related purchases. By analyzing this data, you can identify areas where potential excesses might be occurring, allowing you to take corrective action.

Your Takeaway

Cutting business expenses isn’t about penny-pinching — it’s about making smart and cost-saving financial choices that strengthen your company’s financial health. Graph’s cash management and corporate spending platform can be a valuable tool in achieving this goal.

With features like multiple currency bank accounts, global payout functionalities and corporate cards, Graph allows you to streamline your financial operations, reduce the cost of international transactions, better manage your global finances, and keep a tighter grip on your expenses. Get started on Graph today.