Business entities that need to increase profits must choose between raising prices for their products or services, cutting their expenditures, or using some combination of the aforementioned two options. Since increasing prices can cost the business its competitive advantage, before increasing prices entrepreneurs often focus on cutting expenses and overhead costs. What follows are five areas where many businesses can look to get some extra green within their own organization.
Reducing overhead in buildings must be carefully planned. Entrepreneurs will check the insulation, but other areas need careful planning. Storage space should be located in areas that may be closed off to conserve heating and cooling. Tasks should be arranged to keep the work flow moving over a minimum distance. Skylights and other natural lighting should be used so that artificial light usage is reduced to a minimum.
Employees should be encouraged to turn off lights and equipment that are not being used. In addition, specific employees should be assigned to check the plumbing for leaks and faucets that have been left running.
Equipment should be checked periodically to make certain that it is operating efficiently. When a machine needs repaired, managers should run a repair/replace analysis. Replace older machines with energy efficient machines.
Networks should be developed so that many employees may share files and output devices. In addition, equipment not being used should be turned off if the technicians approve it.
Efficient business operations depend on well-trained employees. Supervisors can evaluate and improve employees’ performance. However, as with other business areas like customer service and information technology, there are options for more efficient human resources management through software. An HRMS solution can help to reduce your overhead by getting rid of work redundancies and helping to streamline increases in employee productivity. As with any department, it’s important that you find the right balance between technology and the human element to make it most effective.
Small businesses can reduce overhead by outsourcing some operations. Accounting, data processing, sales and other business functions that may be provided by outside sources can reduce overhead. Periodic analysis of each business function should be done to determine the profitability of outsourcing.
Supply Chain Management
Analyze your supply chain. Look for more efficient supply routes, and providers that can provide equivalent products at lower prices than that of current suppliers.
Reducing overhead is a continuous process. Since new software programs are constantly being developed, managers should check the Internet for software and ideas that enhance business efficiency. Quality products sold at lower prices help business entities maintain a competitive advantage. Reducing overhead means lower prices.