5 Ways: Reducing your Business Expenses in 2022
A U.S. Bank study declared that 82% of failed companies stated that cash flow was a key issue.
One simple way to increase cash flow? - Reduce expenses.
But this is easier said than done.
It is likely that your organisation is spending more than it requires on assets and bills, and many other expenses.
In fact, Reducer uncovered that there was an accumulative of approx £7.6 billion in potential savings for businesses in 2021. This astronomical number indicates that most businesses could be doing more to reduce their expenses in 2022 and beyond.
We will present you with 5 ways you can reduce business expenses in 2022. This will in turn enable your organisation to reap more cash flow and have more flexibility in growth. They are data-led, practical, and most importantly make a huge impact.
Here it goes…
1) Adopt Cloud Technology
A key benefit of utilising cloud technology is that it can significantly reduce hardware costs. In fact, Oracle NetSuite has been proven to reduce IT costs by up to 75%.
Think of it this way - having all of your infrastructure in the cloud, on an online system, makes an on-site server obsolete (finally!).
Cloud technology is particularly useful for businesses that are accelerating in size. Purchasing hardware can be highly expensive and complex, especially as you begin to scale. This is one easy way to skyrocket your expenses! With cloud technology, namely Enterprise Resource Planning (ERP), the cost of purchasing, implementation, and maintenance is drastically lower.
A key benefit of cloud solutions for growing companies is that it is highly scalable. Just imagine your business scales from 50 employees to 100 employees. 100 employees to 1,000 employees even! Whilst adopting a traditional system structure, The hardware upgrades required will cause a huge dent in your cash flow and is an easy way to strunt your growth. Reversely, cloud ERP platforms such as Oracle NetSuite support your growth through every stage, with no need to purchase additional hardware.
2) Go Paperless
Going paperless can be linked to our 1st point - having all internal and external documentation hosted on a system rather than in a physical format is highly advantageous in the digital age.
Why? Not only will you save a drastic amount of money by eliminating the need to purchase paper, but you will also increase your effectiveness as an organisation immeasurably. Especially as you scale into new territories, it is key to have all of your documentation in a digital format so that it can be shared company-wide.
Here is a fact for you…
According to TotallyPaperless.com, an average office filing cabinet can store up to 20,000 blocks of paper. This can cause expenses of up to £25,000 a year and £1,600 to maintain. It is also likely that your business has more than one filing cabinet!
Think about how much money your business could save by simply going paperless and hosting all documentation in the cloud. Your cash flow would be increased significantly which places you in a much healthier position to grow.
Another interesting data piece comes from Xerox, Their research uncovered that 46 percent of employees waste time every day on paper-intensive processes. Poor employee utilisation is an expense that businesses often overlook. This adds an opportunity cost - the time saved in locating a paper document and fulfilling other (often meaningless) administrative duties can be otherwise invested in more impactful tasks. Calling leads, online marketing research, you name it!
3) Focus marketing efforts online
Focusing your marketing efforts online can reduce expenses more than you realise, particularly if you have not researched its’ effectiveness, sustainability, and infinite possibility.
Digital marketing (social media, Google ads, etc.) generates a much higher Return on Investment than traditional methods (newspapers, magazines, etc).
Why? Well, in our previous point we have already outlined the associated costs with paper and printing. By channeling your marketing efforts online, these costs are eliminated and the overheads of distribution are naturally less.
Moreover, your business can reach an incomparable number of new audiences through online marketing - it is more capable in every sense of the word. Relating this point back to cutting expenses, you need to spend less on marketing your products/services in order to reach a broader audience set. The fact that Facebook users generate 4 million likes every minute should highlight the scale at which you can reach your potential buyers.
Finally, who said digital marketing efforts have to involve spending money? There are many free digital marketing processes such as content marketing, social media marketing, and search engine optimization which you can master in order to increase your reach.
Linking this back to our point on Facebook generating 4 million likes every minute, you can create a high-quality social media post for free, which goes ‘viral’ and lands you new business. Traditional marketing methods such as a newspaper article will never be as effective or scalable! With digital marketing, you are reducing expenses and increasing reach.
4) Say Goodbye to Landline
It is clear that eliminating physical resources is a key theme in our expenditure reduction methods. The world is becoming digital, whether we like it or not.
Traditional telephone landlines are expensive, especially when providing staff with these at scale. Providing 500 employees each with a personal landline is one easy way to eat up your budget!
In 2022, this can be seen as an obsolete cost.
You can ask your employees if they would rather use a cell phone (this is particularly useful for the Sales department), implement VoIP, or install virtual telephone lines. These methods are much more cost-effective than traditional telephone lines, allowing your business to reduce expenses and increase cash flow.
In 202, AT&T stated that their organisation will eliminate landline coverage:
“We’re investing in a technology that consumers have said they don’t want anymore and wasting precious hundreds of millions of dollars that could be going to the new technologies that would do a better job of serving customers.”
5) Keep your Employees happy
All employers can acknowledge the high cost that comes with employee turnover. It is much more expensive to hire new employees than maintain existing ones.
Whether it be hiring, training, or a range of other factors, onboarding and letting go of employees is an expense that every business would prefer to avoid.
High employee turnover has the following impact on organisations:
Cost of severance or other exit packages.
Cost of recruitment and talent acquisition.
Time on resume analysis and interviews - opportunity and wage costs
Time on onboarding and training - opportunity and wage costs
Lost productivity and confusion
Turnover costs can be more drastic than a lot of people would expect...
For a minimum wage role (this is often associated with the highest turnover), it costs approx 16% of the employee’s annual salary. This leaps to 20% for medium-level roles. For high-level executives, costs can be over 213% of their salary!
Moral of the story?
Keep your employees happy and focus on building an organisational culture which makes them want to stay.
Career progression opportunities. Benefits. Showing an interest in their personal life. You name it!
High employee satisfaction significantly increases the odds of them staying longer in their role. Moreover, research from Eleved uncovers that they can be 12% more productive.
This allows your organisation to save money on on-boarding and exit costs (as broken down above) but also allows you to get more out of your employees, allowing your staff to generate more ROI.
To learn more about how cloud technology can reduce expenses for your organisation, click the link below: