How to Reduce Your Overheads

 


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Since profit is what you are left with after you have paid your business costs, it stands to reason that one of the ways you can increase your profit is by reducing your overheads. In this article we will share some key strategies to help you reduce your overheads and grow your business.

Reducing Overheads

Whilst a quick fix solution to the issue of reducing overheads is always possible, businesses need to adopt a long term approach.

The challenge is to considerably reduce overheads without damaging the business’ development and ability to deliver to its customers.

This means that companies should avoid cutting overheads to a level where it is difficult for them to function effectively.

Research and development along with advertising costs can normally be cut without too detrimental an effect. Furthermore, because they can be cut immediately their effect on the reduction of overheads can be felt straight away.

Other simple ways that you can reduce your overheads include renting equipment rather than buying it so that you do not have to lay out significant amounts of cash in one go; letting out part of your office space if you own it and renegotiating payment terms with your suppliers.

A number of companies seek to reduce their overheads by cutting down on the number of people that they employ and staff hours. The trouble with this method of reducing overheads is that company morale can be affected and you may find that key employees start to feel insecure and as a result quit the company.

You can also try and reduce overheads by cutting back on high expenditure items such as property cost and the purchase of new equipment. However, this approach does have some down sides. Cutting back on property costs will take a long time to have any real effect on the balance sheet. Whilst reducing your spending on investments can undermine your business’ potential to grow and remain competitive.

On Stop's Reducing Overheads Programme is designed to improve cash flow so that companies can secure profit without the need to reduce overheads.

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