5 Smart Ways to Reduce Your Company's Overhead Costs

Overhead cost according to Investopedia, is an accounting term that refers to all on-going business expenses not including or related to direct labour, direct materials or third-party expenses that are billed directly to customers.

The subject of overhead is very crucial because it is part of what determines whether or not a business will be able to meet its financial goals. It is also important to know that while setting smart or clear goals is just a precursor for achieving the goals you have set, the real work rests in building a culture of discipline and accountability in the workplace. These qualities are what make those goals sustainable.

On the other hand, there is the issue of making regular cash flow analysis to determine how much money your company spends, how you spend it, and where you get the money from. Once you’ve figured out all these, it becomes easy to determine if the entire spending falls within budget.

For many companies, spending within budget remains nearly impossible and that’s because the bulk of the money goes into overhead costs. This is an issue of growing concern for many small businesses, and even big brands, which are constantly struggling to cut out the overheads.

To reduce your overhead costs in a way that wouldn’t affect your business operations, consider applying these smart strategies.

1. Invest in technology

Over time, the use of mobile apps in business operations has proven very effective in reducing massive workload. It simplifies work process and allows jobs to be closed on time. Apart from the fact that it helps to limit your staff population, it also helps to reduce certain cost like over-time payment. Although, building an app could cause a dent in your pocket, it saves you money on the long run.

2. Outsource or use freelancers

Outsourcing some aspects of your business could also help to reduce a great amount of overhead. But in doing this, you must consider the cost, benefits and risks involved. These are the three critical factors that’d determine if outsourcing is the best decision at a particular time.

In the same vein, consider hiring freelancers where appropriate instead of employing staff. The advantage is that a freelancer is paid per project, in contrast to monthly salary and some other benefits that regular staff receives. Also you could use the services of a mail forwarding address provider so you could enjoy the benefits of having offices in different cities without actually spending a fortune to get the office spaces.

3. Cut travel cost

There are many alternatives to flying out to attend meetings or honour business deals. Depending on distance, you could choose to travel by rail or road, and these are cheaper alternatives. If possible, try and conduct such meetings via internet call.

However, if all these won’t produce the desired results, you look for travel companies whose flight tickets are affordable. A web search on terms like ‘cheap flight tickets’ would return tons of results from which you can choose. Again, if you’re used to flying business class, try economy class instead. Use business hotels instead of luxury hotels. You should also watch out for travel agents that issue discounts or promo codes.

4. Work from home

Perhaps you don’t want your entire staff to work from home. Why not consider giving this opportunity to few of your employees who prefer it? In many cases, employees with the opportunity to work from home will accept to take less salary due to the freedom they’d gain and lack of commuting costs.

5. Optimize the use of consumables

The cost of using consumables is often overlooked by many. Interestingly, these costs add up to significant values if properly calculated. The cost of tissue papers, water dispenser, papers, internet connection, hand sanitizers, satellite TV subscription, utility bills and some other necessary required items.

The solution: go paperless if possible, conserve energy by turning off all lights and electrical appliances after working hours, and buy products in bulk. You’d be surprised how much money you can save.


Jimmy Rohampton is a freelance writer, blogger and business consultant from Southwest London. He travels the world and helps people master blogging and online marketing at HowToCreateABlog.org. Think you're interesting and he should know you? Say "Hi" to him at Jimmy@HowToCreateABlog.org

Go Deeper | Website

Want More?

New Graphic
Subscriber Counter