As the year winds down, most business owners start to assess how the past 12 months went for their companies. Using a critical eye to evaluate things that went well — and to determine what didn’t work — is an easy and cheap way to make essential changes.
For example, one theme that might come to light during this judgement period are hidden costs and fees that have been dragging down your bottom line. By tracking those hidden costs (which are often hiding in plain sight), you can better determine which ones to scale back on or get rid of completely. Some of the below ideas will save you more than others, but remember that when it comes to cutting costs, every little bit counts.
The cost: Paper and ink
You might not be able to cut paper and printing costs from your business completely, but going digital with things like your receipts and invoicing will not only drastically slim down margins on these items, but it’s better for the environment, too. For example, one survey found that businesses waste an average 14 percent of their revenue on document and print-related inefficiencies and print an average 10,000 pages (worth approximately $725) per employee per year. If that’s not enough incentive, consider that we use approximately 12.4 million trees (and a ton of other resources) a year in the United States alone to print our paper receipts.
The cost: Inefficient heating and cooling
It might seem insignificant, but if you work in an office environment that demands a certain level of heating and cooling throughout the year, doing so inefficiently could be costing you a lot of money. Switching to a smart or programmable thermostat helps you customize climate control in your office so that the air or heat will never accidentally be left on. Meanwhile, upgrading your windows — or at least tightening the seals around windows and doors — can help prevent costly drafts
The cost: Subscriptions
Monthly or annual costs for subscriptions can really add up for a business, just like they do in our personal lives. Sometimes this is unavoidable, but it’s a good idea to check in on your business subscriptions annually to make sure that you’re using everything you pay for. Items to check on that could be on the chopping block include things like cloud storage, operational software and phone and/or internet.
The cost: Financing Fees
Assuming you needed startup capital to get your business off the ground, you may have turned to a loan (or multiple loans) for financing. It’s a solid business strategy to revisit any business loans you have every year to make sure that terms didn’t change, and to determine how much you’re paying for things like interest and annual and processing fees. If you’re paying a lot for these things, it might be time to consider calling your bank to see if you can negotiate lower fees, or to think about refinancing to a product with lower rates.
The cost: Essential service fees
Similar to loan financing, once you read the fine print you may be surprised to learn how much you’re paying in fees for other essential business services, like cable and insurance. Again, consider asking your current provider to cut back on the fees, or shop around for options that are more friendly for your bottom line.
The cost: Office space
If there’s anything the past 17 months have taught us, it’s that traditional business practices are a moving target. When the world shut down last year, many companies discovered that not only were their employees able to work remotely, but that they were actually more efficient working from home. A recent survey found that almost half of companies planned to use a hybrid work model for the second half of 2021, which is good because nearly 30 percent of working professionals said they would quit if they were forced to return to an office after the pandemic. Besides the potential for a more focused and productive team, cutting down on in-office facetime also provides business owners with the opportunity to cut back – or completely cut out — overhead in the form of office space and utility costs.
The cost: Shrinkage
In the business world, shrinkage refers to a loss of inventory. This can happen for any number of reasons including shoplifting, vendor and/or paperwork errors. According a 2020 survey, shrinkage is at an all-time high, accounting for 1.62 percent of a retailer’s bottom line and costing about $61.7 billion. Figuring out where most of your shrinkage issues come from is a good start when it comes to mitigating this particular risk. For example, if shoplifting is the problem, investing in heavier security might save you money in the end. If it’s technical errors, consider a better inventory management system to help you track and maintain data. Although it might seem like a heavy upfront cost — rather than a cut — to invest in something like security or inventory management, if these upgrades save you in lost business throughout the year, then the costs are probably worth it.
Successful business owners know that business needs frequently shift. Assessing how you spent money last year — and recognizing where you might be able to make better monetary decisions — can help you keep your business in top financial shape every year.