Effective Cost Cutting Measures

You can boost profits by applying proven, effective cost-saving methods.
You can boost profits by applying proven, effective cost-saving methods. (Image: Thinkstock/Comstock/Getty Images)

In slow economies or when other business conditions cause a drop in revenues, employing effective cost-cutting measures can reduce profit erosion and provide a framework for keeping costs low even after conditions improve. Even if you think you know all the ways to reduce costs in your business, realize that one simple change in cost management can make a significant difference in your profits at the end of the year.

Cash Management

Small companies with limited to no staffing in the financial area often do not consider the impact of improved cash management. Even large companies can overlook a few cash-management techniques that can improve their position. If you are borrowing to meet your short-term needs, realize that improved cash management will reduce your cost of capital since some of your needs can be financed by freed-up cash internally generated. To improve your cash position, only pay bills when due. Accelerate income by receiving payments electronically as opposed to waiting for checks to arrive in the mail. Be more aggressive in pursuing payment for past due amounts. Get interest on idle money by having your financial institution sweep funds into interest-bearing accounts.

Office Supplies and Facilities

Review office supply costs. Once a year get competitive bids for supplies. Examine copying costs and encourage two-sided printing. Consider letting your salespeople work from home instead of your office. You’ll reduce space costs while giving them a more convenient way to work.

Dues and Publications

Examine costs of dues and determine if memberships in associations can be justified from a business perspective. Examine, for example, how much new business was generated from associations where you attended networking events.

Examine publication subscriptions. Check to see if you are paying for duplicate copies of the same publication. If you are, set up a circulation list where only one issue is circulated among interested readers.


If feasible, cut back on overtime hours. Use more part-time workers. Examine every job and determine if the job is still necessary or if two jobs can be combined into one. Periodically compare benefit providers such as health insurance companies.


Periodically examine your insurance costs such as property and casualty insurance. Compare costs every two years. Check to see if the underlying value of what is insured has dropped. For example, if you own a building and real estate values in your area have dropped, you can pay less and still be protected.

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