When business is booming, you probably aren’t worried too much about overhead costs. You’re making a profit and know that monthly costs are covered. However, once things slow down, you might start wondering where you can cut costs and still make money. Cutting overhead costs doesn’t need to be difficult. Below are a few ways you cut some of the most expensive overhead costs.
How Do Operating Expenses Work?
Operating expenses can be broken into daily, monthly, and annually. In general, overhead costs are fixed expenses that you need to pay every month. These typically include office space, power, internet and any other fixed cost that isn’t associated goods or services. Let’s break these down even further
Unless you work out of your home, you have to pay rent for office or warehouse space. Your lease is a specific amount of money that comes off the top of any profit. It can also one of the most expensive bills you have to pay. In fact, it’s not uncommon for business owners to be house poor simply because of the cost. If this sounds all too familiar, you need to consider finding space. Even reducing your rent by a couple hundred each month can improve cash flow.
If you own a fleet, then you know how expensive the upkeep can be. What’s worse is that you may be paying to keep those vehicles on the road than you’re actually earning after you deduct all of your expenses. One way to save money is to switch to electric vehicles.
Utilizing electric vehicles are generally better all the way around. They cost less to maintain, are better for the environment, and are far more sustainable than ones that run on fossil fuels.
You also need to look at how much you’re paying every month for utilities. Power, water, internet, gas and sewer can take a bit out of your profit. Depending on where you are, you might have more than one provider for all of these services. Take the time to comparison shop and switch if it makes financial sense.
Unless you do everything on your own, you probably pay admin costs. In fact, even if you’re a solopreneur, you still need to factor in the price of office supplies. Unfortunately, if you’re seeing a downturn in revenue, you may have to lay off staff to stay within your budget.
If you’re the only one working in admin, you should look at how much you’re currently paying for office supplies. It might be better to buy in bulk from a different manufacturer than from brand-name retailers.
Keeping accurate financial records starts with proper bookkeeping. If you’re currently paying an outside bookkeeper, you want to reconsider. You can find a lot of software options online that help you keep track of your finances and prepare your taxes.
There are even some surprising tax write off’s that these programs can alert you to. If you do need extra help, most options offer a paid subscription plan that also includes guidance from a licensed tax preparer or bookkeeper. They can help you claim the right deductions and verify that you filled out the appropriate forms prior to submission.