Optimizing Your Business Expenses: 7 Strategies for Success

Entrepreneurs don’t run a business for mere amusement, they want it to thrive, grow, and play a valuable role in their customers’ lives through their services and product offerings.

In order to accomplish their underlying business goals, entrepreneurs have to be strategic with how they run their businesses. 

Constant adaptations and adjustments are a must to be a cut above competitors. And one crucial strategy to increase this chance of success is by optimizing one’s business expenses.

Entrepreneurs have to be on the constant lookout for ways to lower their spending. This is especially true if their costs are teetering close to their monthly revenue line, or even exceeding it.

Cutting back on business expenses helps ventures grow and put in resources to improve customer value. That said, with the number of possible ways entrepreneurs can cut costs, it can be dizzying to find the optimal strategy that can truly set the business up for success.

If you’re an entrepreneur looking to optimize your business expenses, you’re in the right place. We’ll give you seven financial tips to help you efficiently allocate your business finances the right way. These tips will ultimately help you boost your bottom line.

Let’s begin!

1. Lease Instead of Buying Equipment

Cash flow is the lifeblood of any business. If you’re knee-deep in debt, you’re just one business emergency away from shutting your doors for good. 

When you’re in a financially precarious situation, purchasing equipment in full is a tremendous risk since you’re essentially siphoning all your cash flow into one major purchase. 

A business has many running costs, and it’s important to consider these costs before making a purchase that you may not be able to afford.

If you deem that buying equipment is too risky, then you can consider leasing the equipment instead. This won’t grant you eventual ownership, but it helps keep your cash flow at healthier levels than it otherwise would if you bought it outright.

You can even go the extra mile and consider novated leasing. This type of leasing uses your pre-tax salary to purchase a business asset, like a car. It also takes into account future tax deductions. This means less spending for you overall.

This guide from Westpac Australia gives a brilliant breakdown of how businesses can capitalize on novated leasing and improve their financial and operational health as a result.

2. Audit Your Company’s Finances

A fairly straightforward yet effective way to optimize business expenses is by meticulously tracking your company’s financial transactions. 

You can do this by reviewing the budget, tracking historical transactions, and reviewing financial statements like your income statement and cash flow accounts. Using accounting software like Zoho Books, Fresh Books, and others reviewed in the Small Business HQ guide can help avoid errors by providing accurate financial tracking and forecasting. 

Examining where your business money goes gives you a clear glimpse of your cost breakdown. You can then use this information to focus on individual expenses and pinpoint expenditures that may be inefficiently draining your company’s budget.

You can work alongside a financial expert to help you decide how to cut or relocate your spending more efficiently. This way, you can enhance your profitability and sustainably grow your business without running the risk of costs holding you back.

3. Seek or Negotiate For Better Supplier Deals

If your priority is to reduce spending and you’ve already stripped your spending to the bare essentials, then the next thing to do is to look for better deals from your suppliers.

This can be a tough ask for new businesses, as most suppliers have fixed rates. But there are a few strategies you can employ to get on the good side of your suppliers.

One such strategy is to build a strong working relationship with them. Consider communicating your desire to get inventory at a cheaper rate and granting a promise in return. 

For example, you can promise in a contract to purchase exclusively from them or you can buy their inventory in bulk.

In addition, prove to them that you’re a valuable customer by making your payments on time. In doing so, you can potentially get discounts and other perks through negotiations.

If your current supplier doesn’t budge, then you can consider seeking alternative suppliers to lower your procurement costs. Perhaps getting supplies from an international supplier would be cheaper, or they’d be more responsive to negotiations. 

Consider contacting various suppliers and finding the best deal for you to optimize your cost savings.

4. Leverage Technology to Enhance Operational Efficiency

Technology is one of the most helpful tools business owners can harness to improve their business operations. There are countless processes across all industries that technology can perform or refine with minimal human intervention. 

For example, software can identify trends, process orders, handle customer service inquiries through chatbots, streamline internal communications, and input accounting entries—all with greater accuracy and faster speeds than their human counterparts. KM tools, or knowledge management software, can organize and share crucial business information. They add to the list of ways technology can streamline operations.

Furthermore, technology also helps provide extra layers of security in the workplace. From robust anti-virus software to physical security measures, technology can help stop expensive problems like theft from arising. 

This can help keep your business safe and in continuous working order, which can therefore keep the gears running and money flowing. So don’t be afraid to embrace these technological solutions every once in a while.

5. Reduce Overhead by Encouraging Hybrid Setups

If you’re renting an office, it can be expensive to keep all the computers, lights, and temperature control systems running throughout the day. In Australia, a small commercial office’s utility bill tends to average approximately $1,000 a month—which is certainly no small figure.

While your business structure may warrant an on-site presence, try to encourage your employees to take a hybrid or work-from-home setup every once in a while. 

A WFH arrangement doesn’t have to be a permanent setup for your employees, but if you’re able to structure your business in such a way, you can consider downsizing your office and reducing rental costs alongside it.

This effectively translates to less electricity output in your commercial space, which can reduce your electricity bill. And in a year, you can potentially enjoy savings reaching thousands of dollars—all without affecting your operational productivity.

6. Outsource Non-Core Activities

Labor expenses tend to make up a big percentage of a business’s monthly costs. If your priority is to minimize your spending, then you can consider slowing down on hiring full-time staff and taking on contractors to do non-core activities instead. 

Certain functions like HR, marketing, and customer service can be handled by specialized external firms or professionals. This reduces overall departmental spending and also guarantees that you have a qualified professional offering a high-quality service. 

In many cases, outsourcing can also be done at a lower cost—which can help you optimize your financial resources and allow your full-time employees to accomplish more productive tasks that drive business growth.

7. Embrace a Cost-Conscious Culture

While you don’t want to be a cheapskate, you should streamline your finances and reduce spending as much as you can.

First, look at recurring expenses that your business is making and vet whether they’re worth continuing or not. If they aren’t, unsubscribe from such services.

Then, review the future spending habits of your business. Is there a tendency for you or your staff to spend more of the company budget than necessary? Correct these habits and uphold a cost-conscious culture.

While you don’t want to compromise the quality of your product or service, you should try to help your business withstand financial pressures. And the best way to do that is by maintaining a tight and strategic grip on your finances to ensure long-term profitability.