Every Penny Counts: Top 5 Ways Your Business Is Not Cost Saving
A wise man once said that a penny saved is a penny earned. And this is never truer than in business, where effective cost savings can mean the difference between success and failure.
So there you have it, spend the pennies in the right places and business glory awaits! Simple, eh? Well if it was, we’d all be driving around in Lamborghinis and holidaying in Monaco.
The truth is that some of the costs that go into running a business are fluid, making them difficult to monitor or control. As any boss knows, the biggest cost of doing business is often labour. With labour costs – including wages, benefits and payroll or other related taxes – accounting for up to 70% of total business costs, making savings where possible whilst keeping your workforce happy and productivity up is a no brainer.
In the face of rising costs, it’s no shock that companies are looking to reduce their spending with cost-cutting initiatives. Many are feeling the pressure to do more with less – less workers, fewer resources and less cash.
But there are simple ways to meet the labour cost issues head-on and make sure your business thrives. Here’s a few:
Review salaries and wages
In the words of singer Yazz: The only way is up! And that’s generally the case for salaries and wages, which tend to move upwardly even in changing markets and financial conditions. Pay schedules should be regularly reviewed to make sure they are in line with current trends, and not just hand out annual pay rises because it was the ‘norm’ back in the day. If your workers are taking home more than what would be paid for their jobs today then delay rises until the payroll is in line with current trends.
Reduce Employee Turnover
High employee turnover = excess costs. Fact! As well as the actual costs to your operation due to fees and salaries of those involved in recruitment, selection, employment and training of new employees, there’s even more indirect and ‘invisible’ costs to consider. A high employee turnover results in poor quality workmanship, longer production times, greater waste and greater oversight. If you want to be effective at cutting costs, maintaining a stable employee core is the key.
Train workers in different areas
Workers with a unique skill or licence can generally command premium pay in the marketplace. But being completely dependent on the skills of these specialists may also be affecting your ability to make changes in your operation. By cross-training staff your workforce will be able to perform a variety of operations, enabling you to make changes, including layoffs, without affecting your ability to deliver the goods to the customers.
Convert fixed Salaries and Wages into Commissions or fees
Instead of making workers redundant if times are tough, why not instead try converting their costs into an expense that is only paid when there is an accompanying revenue to your business. A salesman on a salary may be willing to accept a higher commission rate with lower guaranteed pay while others may accept well-paid contract work when it is available as opposed to a regular wage.
Automate to accumulate
Technology has improved enormously in recent years; it can handle more duties, it’s user-friendly, and it’s cost effective. Leverage your existing employees by using the most up-to-date tools to simplify and speed up their work. Paying workers to do non-critical manual tasks that take up hours of working time is not cost effective. Outsourcing duties is often suggested as a way to keep down costs, but with a small investment in the right technology and equipment, all duties can be kept safely and cheaply in-house while freeing up staff to do the important jobs. Figures show that installing Auto Feed shredders can lead to savings of 65% compared to current shredding costs, as well as saving the equivalent of hundreds of pounds per worker in productivity each year. Work smart, not hard!
Managing the costs starts from the top. Is your business as cost effective as it could be?
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