38 Cost Saving Methods For Your Workplace
Updated March 10, 2023
Whether motivated by economic factors or a desire to improve performance, cutting costs can help almost every business. Greater efficiency can boost a company's profits and even decrease environmental impact. Because there are many ways to cut costs, a company can customize their cost saving plan by selecting the right methods for them. In this article, we discuss 38 ways to cut costs in a company by managing resources well, minimizing waste and avoiding new expenses.
What is cost saving?
Cost saving refers to any action that reduces the price of conducting business. Personnel decisions, process streamlining, product choices, location and geographic decisions can all contribute to lower costs. A company might choose to pursue cost saving strategies over the short term if the market changes drastically or over the long term to maintain a budget and increase profits.
Examples of cost saving
Many cost saving strategies affect many aspects of an organization, so it's helpful to think carefully about the outcomes of cost saving methods before implementing them. Here are some cost saving considerations:
1. Reduce spending
Identify which tools and resources are critical for your business and consider delaying the purchase of new items. Consider maintenance costs for current assets as part of your assessment.
2. Avoid IT upgrades
In a cost reduction cycle, delay any software purchases or system upgrades. If and when you do upgrade, you might purchase software that can perform multiple functions or replace analog paperwork processes.
3. Invest in equipment
Invest in equipment that can increase efficiency through higher speed or multiple uses, but consider how long it would take the advantages of the new equipment to pay for the cost of purchase.
4. Reconsider research and development
Research and development departments help create value in the long term, but if you are looking to cut costs in the short term, consider temporarily reducing the research budget.
5. Reduce travel
Reconsider whether travel is necessary. You might suspend all business travel or institute an expense limit for business travel.
6. Evaluate employee perks
Check usage of company perks to see whether corporate memberships or discounts are providing value for employees and discontinue unused programs.
7. Check facility usage
Consider a survey to gather feedback on office and break areas. You may save costs by reducing unused amenities or by increasing pay rather than providing in-office amenities.
8. Reevaluate partnerships
Consider whether your business partnerships are serving you financially or if you could leverage your network for a better price on that service or item.
9. Improve facilities
Investing in your workspace to make it more energy efficient may contribute to lower utility costs over the long term.
10. Reduce physical inventory
Temporarily holding less physical product in inventory could help reduce storage costs.
11. Reduce digital inventory
Restructuring your digital archives for internal records and any website needs can bring savings on internet storage costs.
12. Evaluate transportation
If your business relies on a company fleet or if you provide company cars, consider how you can make those more efficient. Converting your fleet to electric or hybrid vehicles over time may bring a significant return on investment.
13. Evaluate shipping logistics
Consider whether a different shipping method for your product could provide enough cost savings while still guaranteeing quality service to your customers.
14. Discontinue product
Evaluate your product lines to see if there are products that cost more to produce than they return in sales. It's useful to factor in brand loyalty in this consideration: older products may be contributing brand equity even if they aren't as profitable as newer items.
Focusing on fewer regions can help you save on transportation and real estate costs. Within an area of coverage, you may consider closing stores that don't see enough customers. If your customers visit you only a few times a year, they may be ready to travel further.
16. End unprofitable client contracts
If you have a client contract is raising your customer service expenses or requiring an extensive amount of negotiation and development time, consider ending that relationship to pursue new clients.
17. Alter product quality
Altering the quality of your product can reduce production and supply costs. It's important to evaluate how the quality change may impact customer experience in order to ensure customer retention once you implement the change.
18. Analyze tax savings
A tax professional's consultation can allow you to maximize tax benefits, resulting in more money that you can save during the fiscal year.
19. Design products to cost
If you ask your designers and engineers to work within a desired cost per unit, you can design your new products to fit within your budget.
20. Evaluate your sources
Consider how effective your purchasing power is. If you have long-term relationships with suppliers, try gathering other estimates. You may decide to switch to these new suppliers or use this information to negotiate better prices from your current suppliers.
21. Reduce waste
Reducing waste can lead to both environmental and financial improvements. Examine the waste output from every department and try combining waste reduction with other efficiency goals, like reducing paper waste through increased digitization.
22. Recycle materials
If your business generates unavoidable waste, consider if another business or organization could use those materials. An arrangement to resell this material can turn waste into profit, especially if you sell extra material at a very low rate compared to the cost.
23. Increase production efficiency
To reduce unnecessary processes and delays, evaluate your production lines or service processes. Check for unnecessary steps and consider the time and space that each step requires to see whether you can increase efficiency by rearranging the production line or workflows.
24. Increase administration efficiency
In administrative processes, consider shortening or removing approval steps and meetings. If transport from one location or building to another adds considerable time, try moving departments that require frequent communication closer together. This can allow employees to spend more time on productive, profit-generating work.
25. Increase employee productivity
Increasing individual productivity can also save costs by reducing the need for more personnel. Try to improve performance by taking the perspective of an employee. Considering how the work could be more enjoyable or how tasks could be more engaging. You may ask your team for feedback and additional ideas.
26. Increase communication between departments
You can maximize your purchasing power by making bulk orders and shifting materials between departments as needed. Communicating on similar processes can let you combine redundancies or share efficient processes.
27. Renegotiate terms in committed relationships
Consider negotiating with those who have a financial interest in your business' continued operation such as landlords, close business partners or any large-scale customer. A short-term discount or flexible payment plan could help you both.
Consider moving to a new location, especially if your current location has seen economic changes. The high rent on a central street may not be necessary if your business can shift its commerce online, or you may take advantage of new infrastructure by moving closer to a public transit facility.
29. Lower utility costs
Try cutting utility costs by using them only when you need to. A smart thermometer can help turn lights and climate control off when nobody is using them. Compare your costs for any utilities like internet or phone with competing providers to make sure you are still getting the best service.
30. Reduce business capabilities
To save in the short term, consider which business functions you can delay or reduce, such as internal processes or reviews.
31. Change business model
A revised business model or delivery method could save you money. Consider any adjacent business tactics you could try with the skills and resources you have, like opening a food truck from a catering business or transitioning a boutique to an online store to save on rent.
32. Use alternative marketing
Consider shifting from television or billboard ads to less expensive marketing options. Social media advertising can be helpful if you're selling to a mid-range or younger demographic, while techniques like paying for individual promotions can help you expand within communities.
33. Create marketing partnerships
Partner with other small or nearby businesses to avoid independently doing the same work. You might share marketing and advertising costs, create a promotion that involves both your merchandise or share lists of customer contact information.
34. Maintain even workloads
Evaluate position efficiency in your seasonal employee performance reviews so that you maintain an appropriate workload for each employee and give them concrete ways to measure their own progress.
35. Look at managerial positions
If your managers and teams work together efficiently, consider revising the job duties for managerial positions to involve more profit-generating tasks.
36. Use contract and freelance work
Freelance, seasonal or contract workers can meet temporary business needs at a lower cost to the employer, since the company is not obligated to provide the same benefits to these employees as they do full-time employees.
37. Use outsourcing
Outsourcing or offshoring work can be the best course of action if you seek to minimize costs. Even a local company which specializes in a certain area might do certain tasks at a lower pay rate than it would cost to complete the tasks internally.
38. Consider personnel change costs
Before hiring or releasing any employees, consider all connected costs, like training time, contract termination consequences or separation packages. Changing the duties of existing positions to include new tasks may be an alternative that allows you to improve efficiency without changing personnel.
Tips for implementing cost saving
Here are some ways to make the cost saving process more effective for your business:
It's important to keep everyone informed on any new processes and changes. This way, employees can make sure their personal actions and spending align with the latest policies.
Related: Ultimate Guide To Strategic Planning
Create and use a budget
A budget enables you to see exactly what your costs and profits are, and as you check your actual spending against projections, it can help you employ cost saving methods early.
Get employee input
Incorporate employee feedback into any cost saving process. Direct feedback about how the company uses materials, processes and equipment can tell you about efficiency opportunities immediately, and the feedback may include ideas to solve them.
Explore more articles
- What Is Flexible Time Off? Definition and How It Works
- 11 Challenges Mechanical Engineers Face (With Solutions)
- How To Thank Your Boss for a Raise: Tips and Examples
- 72 Trades To Learn for a Successful Trade Career
- How To Teach Writing Skills in the Classroom in 8 Steps
- Critical Thinking: What It Is and Why It's Important
- How To Export a File Directory To Excel (With Steps and Tips)
- How To Get Your Product in Stores (With Strategies and Tips)
- 16 Nursing Values and Why They're Important
- Letter of Interest: Definition, Tips and Examples
- How To Conduct a SWOT Analysis in 5 Steps (With Example)
- Direct vs. Indirect Cash Flow: Definitions and Examples