Reducing expenses is one of the most effective ways to free up cash flow to use toward company growth. While many companies focus on reducing the direct expenses that impact their bottom line, many business owners are less diligent about reviewing their indirect business expenses. Often referred to as “overhead,” indirect expenses can account for up to 15% of a business’s revenue. Luckily, there are some simple ways to ensure that you are properly managing your indirect business expenses and making the most of your cash flow. Learn more in today’s blog.
3 Simple Tips to Effectively Manage and Reduce Indirect Business Expenses
Never set it and forget it
One reason many companies spend more than they should on indirect business expenses is because system setup is so intensive that it becomes easy to forget about the importance of ongoing maintenance. Payroll is an excellent example: Because it requires so much effort to establish a payroll system, many companies neglect to ensure they are fully utilizing the services they are paying for and don’t bother to renegotiate their contracts. By examining payroll expenses every 2-3 years, you may realize that competitor prices have gone down significantly or that he is paying for extraneous bundled packages. Renegotiating the terms of the contract or switching to a new payroll provider can result in significant savings.
Create a spending matrix to stay on task
The best way to effectively manage indirect business expenses is by periodically reviewing all expense categories. Because this would be impossible for most businesses to do every year, creating a matrix that outlines which categories must be reviewed this year versus which were reviewed the year before will make the task much more manageable.
Regularly review renewal dates
Many contracts are established on an ongoing basis, meaning that you will be automatically re-enrolled under the same terms unless you actively terminate or renegotiate your contract during a specific window. In order to avoid being trapped into paying for unnecessary expenses for yet another year, create a calendar of renewal dates for the upcoming year. This calendar could easily be integrated with your spending matrix and will make it simple to stay on top of ensuring that you are only paying for what your business truly uses and needs.
For more information on how to reduce your indirect business expenses, listen to our podcast when I spoke with Terry Butler of Expense Reduction Analysts.
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