When businesses struggle to break even, they begin to amass debt. And when this persists, the company will fold up before the owners realize it.
As much as profit is significant, many companies are concerned about staying afloat due to the global economic crisis. Additionally, you have to invest money into tools, expertise, and resources to make money in today's times.
A report by McKinsey stated that most business categories saw more than 10% growth in their online customer base. This shows that there are strategies that large companies use to generate and save costs.
In this post, you’ll learn seven practical cost-saving ideas for companies, which in turn gives a proper understanding of how these large companies are saving costs.
But before diving right in, here is what cost-saving is and why it is important.
What is Cost-Saving?
Cost-saving is the financial objective to reduce the excess expenses that occur in any business. When you save costs in your business, you’re cutting out the unwarranted and unexpected expenditures incurred for day-to-day business operations.
Irrespective of your company size or industry, saving costs are essential. It safeguards your financial bottom line and provides you insight into the current financial state of your business.
Ways Businesses Can Save or Optimize on Costs:
There are numerous cost-saving frameworks available for large companies. That said, it is important that you properly check to ascertain the compatibility of these frameworks with your business before implementation. For example, by forming an LLC, you can avoid double taxation and benefit from electing S-corp status, which will help you cut your tax bill. However, before you decide to go with an LLC, you should look into the fees associated with its registration, legal assistance, and the yearly LLC fee you'd have to pay in the registered state.
Also, identifying the requirement for cost reduction is critical to ensure that you adequately maintain your performance measures such as sales, revenue, and contentment among employees.
Ease Down on the Spending
You can do this by determining your firm's essential tools and resources and postponing any impending purchasing of additional products. This offers you a practical evaluation to consider the expenses of current assets' maintenance. For example, you can choose a low-code development platform to reduce the time it takes to create a new website.
Repeat this process for every department in your company.
Verify the Facility Usage
Instead of providing in-office amenities, cut costs by lowering unwanted amenities.
Identify tasks that are best done remotely or roles that can be outsourced to freelancers, then look for ways to plug that into your expenses. Conduct engaging surveys with your team to understand how the office facility impacts their productivity and work-life balance.
Take Another Look at Research and Development
Research and development allow you to create long-term value. They provide you the opportunity to take a deeper look at existing themes so that you can leverage gray areas to save money. For instance, research shows that providing lunch at work helps re-energize the team and improve productivity.
Why Should Large Companies Consider Saving Costs?
Companies must save costs to survive during a crisis. When large companies save costs, they can properly allocate resources and run company operations.
For instance, during the pandemic, many companies were hard hit. But those that had the funds to invest in technology easily adapted and found other means to serve their customers.
They could also scale and implement their employee welfare schemes to improve employee mental health and overall employee-employer relationships.
7 Effective Cost-Saving Ideas for Large Companies
1. Create a List of Preferred Vendor Base
All departments across the board have business and operational expenses and preferred vendors they want to associate with to get the job done. Therefore, it becomes crucial for your Finance teams to have an exhaustive list of vendors to pick from to complete tasks. This will put your company at an advantage during negotiations.
For instance, you have an exhaustive list of hoteliers, and you need to house your traveling employees. With a list of preferred vendors and associated rate cards, you can negotiate your budgeted rates as you please.
2. Bring Your Own Device (BYOD)
Instead of the conventional practice of companies providing gadgets for employees, large companies are now adopting the "Bring Your Own Device" route. As a result, employees' use of personal devices substantially reduces additional costs and trouble when company gadgets get faulty or stolen.
Here, you only need to invest in cloud documentation and a strict non-disclosure policy to ensure that no employees share the company's data with anyone.
3. Negotiate Contracts Long-term
Negotiate the right to set service charge benchmarks so you can automatically reduce service costs compared to market prices.
For every contract that lasts more than a year, review and re-negotiate them all. Put up an A-game during these negotiations and ensure that you signed the best deal for the long-term.
For instance, instead of signing a one-year contract with a company, it’s better to sign a 5-year contract at 25% less. This cuts down the increasing costs that the contracts accumulate at the company’s expense.
4. Invest in Workflow Automation
Workflow automation is rapidly taking over manual procedures characterized by errors, delays, and bottlenecks. In addition, these workflow automation tools do not require human intervention, thus saving time and increasing process efficiency.
These software, coupled with other automation-driven software, can take up the heavy lifting for your employees and get the job done at a fraction of the cost.
5. Hire or Train Paraprofessionals
Paraprofessionals are assigned particular aspects of a professional task but are not licensed to practice as fully qualified professionals.
Because professionals are difficult and expensive to hire, having a system in place to hire paraprofessionals or interns will help you build a team and groom them to expert levels. Additionally, you can always look into and learn about pre-employment screening, as it will make your hiring process easier and less time consuming.
That being said, keep in mind that multinational companies would need paraprofessionals to boost their productivity and relieve experts of administrative mental stress. It could also lead to proper resource allocation and adequate cost savings.
6. Adopt Profitable Technology Trends
The world now revolves around technology. For companies like yours, you might have already adopted the technology.
But keeping up with the trends would be difficult and expensive. So invest in an expert who understands cutting-edge technology in the workspace and use their insights to boost operational efficiency and reduce overhead costs.
7. Use LEAN Management Principles
The LEAN management principles help improve values while minimizing the use of time and materials.
As a conglomerate, embracing LEAN management should be one of the top priorities to effectively cost-save and maximize profits.
With it, you can minimize manufacturing costs by as much as half by increasing labor productivity, reducing production throughput times, reducing inventory, and reducing errors and scrap.
8. Double Down on Improving Employee Engagement
Employee engagement is the most important ingredient when it comes to a successful business.
Your employees are your business's number one asset. Having them perform at their best is, quite simply, a must. Making this a priority is a surefire way to increase your employee's productivity (and the revenue it creates) without adding to your business running costs.
The best way to cut costs is to maximize a resource already at your disposal - your employees. Boosting your teams’ engagement is an effective yet simple solution.
Satisfied and incentivized employees are he key to “cost cutting” for large companies by creating more engagement.
9. Use Low-cost Tools
Businesses must always find cost-saving methods as best practices. But this at no cost means depriving your employees of the right tools to get work done. The goal here is always to maintain good customer service without making the company's routine any more expensive.
It sounds impossible, but it is possible. Take Fyle, for example. At a nominal price of $6.99 per active user, it completely streamlines, automates, and simplifies your entire expense management.
Or take Kommo, for example. With a monthly cost of only US$ 15, you can access one of the most powerful CRM software and provide the needed attention to your clients.
Business cost saving now becomes a race to find the best deal, just like in television shows. The winner isn't the one who invests more, but who invests smarter.
Cost-saving creates an avenue to have an equal distribution of resources.
This would help you achieve your company’s goals and cater to redundancy that may occur over time. It will also increase efficiency and profits and reduce its environmental effect.
For instance, if you use artificial intelligence in your communication with clients, you’d accurately catch up with many clients who couldn’t physically visit your company to close month-long processes in days.
And when you negotiate contracts long term, you’ll have the sense of identifying top priorities, like low price, high-quality goods, and delivery dates, and know what to compromise during negotiations.