Did you know most companies in Australia are unsuccessful due to cash flow problems and high costs? This cost issue occurs due to high overhead costs. In fact, according to the latest statistics, around 20% of businesses in Australia fail due to high overhead costs. Overheads are one area that can immediately become a drain on revenues.
But what are overhead costs? Overhead costs are not directly related to products or services; they are ongoing expenses required to support the business. For instance, if you sell an exclusive package of mixed peanuts, peanuts and payroll can be considered direct costs. Whereas marketing, hiring somebody to clean the floor would be overhead costs.
So, why is it essential to reduce overhead costs? If your books are continuously in the red, your venture will quickly find itself in an unsustainable situation. Not just that, your cash flow, profit margins, and growth prospects will likely need improvement, making it crucial to reduce overhead costs.
Even though you can’t eliminate overhead expenses completely, there are many ways to reduce your overhead costs. Here’s a guide for small businesses in Australia to reduce overhead expenses.
Get a Cost-effective Office Space
For many businesses, one of the highest overhead costs includes costs related to the business premises, whether mortgage repayments or maintenance and utility costs. As a result, you need to look for a cost-effective office area to reduce your overhead costs.
Not sure which office space option is the best? Some of the most effective office space alternatives include:
- A serviced office: This is an entirely operated and furnished office rented to businesses as individual floors or offices. A serviced office comes fully equipped with fixtures and housekeeping along with other services such as Wi-Fi or printers, helping your business get going instantly. Not just that, serviced offices are available in numerous sizes.
- Coworking spaces: These are perfect for implementing a hybrid work structure as they guarantee your office areas a high level of flexibility. However, these are most beneficial for startups.
- Virtual offices: This allows organizations and companies to work from anywhere using their internet, laptops, and computers. Employees use team apps, teleconferencing, and other new technologies to coordinate their projects.
Invest In an Accountant
Even though an accountant might seem pointless in addition to your overhead expenses, hiring an expert is one of the most significant ways to cut overhead expenses. But how does hiring an accountant help you reduce costs?
An experienced accountant can track your overhead expenses and create a budget, ensuring that your spending supports your financial objectives. They can guide you on cutting costs where required, from reducing expenditure in every part of the business to negotiating with suppliers.
But that’s not all! Hiring an expert to manage your business’s finances can provide valuable advice on potential investment opportunities. They can also help you in evaluating potential risks and create financial projections.
Moreover, an accountant’s expertise and knowledge in tax legislation allow them to identify possible deductions you might not have known about earlier, helping you save money. Not just that, they can accurately calculate and file all relevant forms, ensuring everything is done correctly.
When it comes to running a business, time is money. As a result, it’s crucial to automate business tasks. After all, automation is an effective way to boost organizational efficiency by leveraging new technologies to conduct business operations with minimum human involvement. It allows you to reduce your business’s operating costs and boost profits.
Additionally, automated systems can reduce the time required to complete a task. For instance, QA automation tools can speed up operations that might have otherwise taken a massive chunk of a worker’s time. Not just that, automating business tasks ensures the same level of service to clients throughout the day. Customer requests are addressed instantly, improving the brand image.
But which business operations can you automate? Here are some tasks you can consider automating:
- Sending invoices
- Scheduling meetings
- Social media posting
- Sales lead nurturing
- Client communication
Is your business still swimming in paperwork? If yes, it’s time to make the transition; go paperless. The average company spends around $72-$90 monthly per employee on office supplies such as printer ink and pens. However, going paperless provides more significant savings, like reducing the number of reams of paper you purchase annually. Additionally, offsite storage fees can be reduced with the reduction of physical space.
Besides that, a paperless system allows documents and files to be easily accessible. Storing files on a server ensures the data is available and can be kept together. Additionally, network access makes these files accessible from almost everywhere, allowing team members to access files while working from home or traveling.
Moreover, digital records can be made indecipherable and secured against copying, printing, and sharing. Audit trails can reveal who opened which files and when guaranteeing the safety and security of your data. Automating tasks enables your business to deliver the same result to your clients, keeping them happy and satisfied.
Make Efficient Hiring Decisions
Some businesses might go straight to dismissals when trying to reduce overhead costs. However, this approach can cost your business more than you realize, affecting the productivity and morale of employees who stay. As a result, consider aiming to make smarter hiring decisions.
But how can you make efficient hiring decisions? Here are some tips:
- Describe your ideal candidates: You need a strong understanding of your ideal applicant. Remember, the clearer your benchmarks for a perfect match, the simpler it is to assess whether an applicant fits your needs.
- Pay attention to the questions candidates are asking: Listening to their questions allows you to get a sense of their interests and which characteristics of the company culture interest them.
- Concentrate on the applicant’s attitude and skills: Ask them particular questions to understand their work ethic and ability to improve themselves. Consider asking them, ‘Can you explain a situation where you were unhappy with your work? Or ‘What did you do.’
Are you finding it difficult to reduce your business’s overhead costs? If yes, follow all or some of the tips highlighted in this article. Every business aims to grow, and for small businesses that haven’t achieved most of their goals yet, a dip in profits can be a devastating blow to their plans. Hence, in order to ensure the business is operational, desperate times call for smart moves. Reducing overhead expenses can surely help your business save money without compromising on the quality of products or services