Reducing Business Spending Through Cost Management

Written by: Cash101 Staff

A manager should worry about business spending not only in times of crisis but steadily. By monitoring, measuring and analyzing these costs, it is possible to foresee cost reduction identifying possibilities of strategic use of the company’s assets. This article will discuss smart strategies to reduce business spending and apply resources to more appropriate areas.


Manage Stocks

It would be ideal to produce only for immediate sale, without the need for inventory, but this is far from the business reality in general. Exact quantities of output cannot be predicted and unforeseen circumstances that may interfere with business must be considered. A manager should be aware:

  • of your demand;
  • their production capacity;
  • the inputs used.


With these factors mapped, it is easier to identify times of greater production and to control the level of inventories. Depending on the seasonality of sales, on festive or special dates, prior planning allows you to produce enough in advance to meet everyone without difficulty. Likewise, in times of low sales, production must reflect needs.


Reduce smartly

The spending cuts should be consistent and well thought out. There’s no point in saving on coffee and paper towels and not meeting a basic level of quality of life for your employees: It interferes directly with your productivity!

First, act smart: Check with the purchasing department for information on the impact of each cost center on your company’s finances. Analyze where expenditures are being unnecessary and generating waste. Conscientize your team about the need to save on simple routines like turning off the lights, printing only what is needed etc.

Look for investments that bring a return greater than its cost: Consider the possibility of installing presence sensors to control the lamps and timers on taps. In addition to improving organization and economic facilitations, these actions still generate benefits to the environment. This is an idea that your team can support. You can also compare free software options to those that require periodic payment or purchase of new licenses.


Review your contracts

Companies generally enter into contracts of various kinds with suppliers of products and services, such as maintenance of buildings and elevators, cleaning and conservation services, security, HR or computer support. Try to adjust these contracts to the reality of your business. Those with franchise use should be reviewed periodically so that you can identify whether you pay more than you really need and try to renegotiate them with suppliers. Explain your cost control policy to your supplier and let them know that you are reviewing all contracts and adjusting each of them according to your needs.


Review your production processes

Every area of ​​your business has routines and processes. The more adjusted, the lower the losses generated. It is more strategic to establish and manage your production processes than to compromise the quality of your final product with the economy of inputs and finishing.

Together with your supervisors and production managers, design each process, both production line and administrative. Leaders know their areas in depth and are best suited to suggest changes and improvements. Study the possibility of implementing awards when spending reduction targets are met. This will cause the employees themselves to worry about waste. Without them, nothing can be done.


Hire effectively

Ensure that your mission, vision and values ​​ begin to be favored at the time of hiring, which should be consistent for all positions. Define selection strategies for each hierarchical level that value important values ​​for the institution. Look for professionals with a profile similar to that found in your best teams and that will be aligned with the areas of performance.

Internally, you should be concerned with knowing the wishes of your current employees about the colleague or superior to be hired. This is because the dynamics between them will directly affect the results of your business. As for the candidate, your career and future expectations need to match what you have to offer and what you seek. Consider recognizing internal talents: Good employees can go unnoticed and become unmotivated by lack of recognition. Internal promotions value your team and make your team more committed.


Track cash flow

Understand how the cash-in and cash-out movement works during a month. This will help you avoid debt, interest payment, and cut planning. If you do not master financial concepts very well, invest in courses or a specialized consultant.


Review debts with banks and suppliers

Be careful and always pay the debts with banks and the credit card, as interest rates are very high. If you are already paying high interest rates, try to renegotiate with the institutions. Try to tailor the ways of payments of your suppliers with the way of receiving your customers. If you received early, you should have all the cash in hand to pay cash and negotiate a discount for that.

Reducing business spending through cost management is very effective. It does not depends upon the exit of any competitor and also does not depend on the reduction of its sales price: it refers much more to the improvement of internal quality.


With the above precautions it is possible for a company to have significant savings. It is also important to carry out the correct planning and to prepare a budget that is based on financial reports that reveal how the company’s revenue was invested or wasted, always with the objective of improving and correcting the business trajectory.



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Reducing Business Spending Through Cost Management

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