How to reduce operating costs in your business

Keeping a close eye on operating costs is always important in business. There are often many ‘small’ costs that can accumulate to overburden your budget or cost you unnecessary money. So reviewing your operating costs should be something you do on a regular basis.

Increasing profitability can be achieved by either increasing revenue or minimising costs.

How to reduce operating costs in your business

Minimising spend on utilities

One of the primary areas of operating costs prevalent in companies can be the utilities bills. With rising prices and a lack of regulation to protect businesses, it’s easy to get stuck in expensive contracts. Looking at your spending on all utilities regularly is a must. You can either look at limiting usage or switch to cheaper suppliers and contracts.

Utilities may include looking at gas, electricity, water, broadband, waste, and recycling costs.

Switching of lights, making use of natural light, switching off technology, better insulating your business premises and turning down heating when your premises are not in use can all help. Purchasing energy saving equipment can also help when you are due to replace things.

When looking to compare and switch suppliers, you should do the following:

  • Look at your current bills to ascertain you usage and monthly cost as well as your contract terms.
  • Compare three of more suppliers by contacting them directly.
  • Negotiate with suppliers, don’t assume they are not open to doing a better deal to get your business.
  • Talk to your current suppliers when you have costs from new suppliers, they may be willing to match a deal and you may then stay where you are.

Payment processing

The payment processing business now has a wide variety of suppliers and deals with or without a fixed contract. If your business is taking only a small amount of card payments each month, then you could be wasting money on an expensive contract. If you take lots of payments, then it’s worth regularly reviewing you deal.

Automate business processes using technology

Technology can enhance workplace productivity and increase efficiency. Often implementing innovative technology can help to reduce costs without a negative impact on the business. Automating tasks can save money on people / payroll costs. Some of the top ways to automate processes are:

  • Cloud accounting to manage bookkeeping and invoicing.
  • Messaging systems like WhatsApp and software like MS Teams can reduce communication costs.
  • Chat bots/AI to reduce customer service time and resource.

Outsourcing business processes

Outsourcing certain tasks or processes can save businesses the need to employ someone in house and still give great results.

The types of tasks and roles that can be outsourced and save you money are:

  • Bookkeeping
  • Accounts preparation
  • Payroll
  • Marketing
  • Manufacturing (to countries with cheaper labour costs)
  • IT

Premises costs

Leasing office or owning office space, paying premises overheads, and managing a physical office can be a drain on your financial resources.The global pandemic has given many businesses the opportunity to reassess their premises needs. With many businesses no longer requiring the size of offices they once had as people continue to work more remotely. Allowing employees to work from home, using virtual meetings more than face to face and providing hot desks, rather than permanent desks.

Unused services

Look closely at your variable costs and identify services that you’re no longer using. If you haven’t used them in a while, then consider looking cheaper alternatives or cancel them altogether. People often set up things on direct debit or auto-pay and don’t regularly review them. Things like software packages, training programmes etc.

Don’t cut too much

Reducing the operational costs is a proven practice to gain better margins and increase profit. But you need to identify the right areas to reduce overheads. You need to ensure that you don’t cut things that will impact on the future performance or growth of your business. There isn’t a one size fits all strategy, but regularly reviewing your costs and streamlining them ensures you’re running a tight ship and could improve your margins.

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About the author
Blog Author

Owais Bombaywala
Working closely with individuals and businesses to help grow their business requires a significant amount of experience and industry knowledge. Owais is BA (Hons) Accounting and Finance and Member of ACCA. Besides being a compliance champion, he specialises in Property tax planning. With over 7 years of experience in Accountancy and Tax world, our clients count on us to give them timely and up to date advise to help them make the right move. Owais works closely with some of the DNS’s most valued clients to give them the confidence they need to focus on their business. He is known for his calm nature and proactive approach. At DNS, we proud to be a modern and client centric firm. Our advise doesn’t just look at what’s best for your business moreover our aim is to help you achieve your personal goals. Away from work, he resolve family disputes and provide care and support to elderly people. He is a founding member of Human welfare organisation Hounslow.


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