He shares some strategies to help put your mental, physical and emotional well-being back at the forefront. (e.g., If you have an accounting background, you may want to consider using tech for marketing instead of finance.). This article examines programs to reduce costly workplace sickness absence. Quickbooks accounting software makes it easy for you to identify and correct areas of waste in your company so you can improve your financial health. These are the key reasons you should help your employer save money: There is also a possibility that you’ll share a portion of the savings. Employers prize people who can add to net profits. They reduce the need for expensive office space and they lower outlays for energy. With the amount of connectivity available today, the difference between an employee sitting in an office and sitting at home is almost indiscernible. Always keep an eye on the current prices of office goods and when they drop, buy as much as you can. A small reward to an employee could end up saving you thousands of dollars. There are dozens of online systems and software programs that can automate and streamline small business functions. People also commonly refer to operating costs as operating expenses, operational expenses, operating expenditures, operational expenses, or OPEX. One of the best ways to implement a expense-reducing strategy is to work with a Third Party Administrator in order to analyze your Employee Benefit Program costs. Said another way, workplace health programs help worksites avoid high health care costs because they help employees stay healthy and stay out of the healthcare system. Eliminating excess costs is equivalent to earning revenue. https://quickbooks.intuit.com/cas/dam/IMAGE/A2f5JVIA2/cfce1cb52f05a4173c6a319c68e581ad.jpg, Operating costs: Understanding and reducing them for your business. … These systems can cover an array of areas of operation, including accounting, website hosting, marketing communications, payroll, and more. You should be more concerned with how you rank within your industry. No organization has a shortage of these challenges, especially in the face of competitive and financial pressures. Outsourcing certain operations is an investment that pays dividends over time. Operating expense ratios can vary by industry. Distribute hard copies only to those who must have printed versions. Robots and automated intelligence can work faster than humans with fewer errors. Are you the type of owner who merely monitors business expenses and income without looking at detailed breakdowns? Before you create an action plan to reduce your costs, you need to make an evaluation of your company’s expenses. You can be a dollar detective. For instance, reducing training and meeting times is often counterproductive in the long-term. The same goes for loans or any debt that you’ve taken out. This article currently has 15 ratings with an average of 3.7 stars, https://quickbooks.intuit.com/r/expenses/8-ways-reduce-operating-costs. If you have the storage space, buy everything in bulk. If you run a Fortune 500 company, you’re perhaps disappointed by this figure. Improving your operating costs means putting yourself ahead of your competition. Many employers have demonstrated that effective workplace health programs don’t eliminate the drivers of healthcare costs, but they do reduce the demand for healthcare services. How to Reduce Energy Use at Work; ... Blinds and shutters can reduce energy costs because less electricity or other fuels are used to cool the premises in summer and to heat the premises in winter. For example, in the section above, we determined that the company’s operating income in the example was $452,000. The best way to minimize the hidden costs of workplace injuries and related insurance costs is to prevent accidents from happening in the first place. If your organization has work that is nonessential to your day-to-day operations, you might want to consider outsourcing it to a third party. Striving for a paperless office is a solid starting point. If you’re not using them, then they’re not improving your operating income. The Third Party Administrator will use this information to find opportunities to reduce expenses and increase the satisfaction of the employees with your health care program. A great way to reduce costs at the office is to buy more than one of everything. Poor work conditions, pay and benefits will also not attract and retain quality employees and will de-motivate employees who do stay. Consequently, employers can reduce out-of-pocket expenses and reduce insurance premiums when they tend to workplace safety. Small business owners who opt to use cell … 2 Costs of hundreds to even thousands of dollars per year per person (or employee) are not rare. Megan Sullivan is a writer with experience in the advertising and digital media space. If not, think about staying at a less expensive hotel (or with friends/family if available), and booking well in advance to get the best fare. Scheduled to go on a business trip? Incorporating technology in the workplace is a top way businesses can enhance efficiency. ©2019 Monster - All Rights Reserved - U.S. Patent No. 3 Individual employees can also save money by improving their health. For example, shifting from paper to electronic portal can reduce the amount of time it takes for your employees to make a change to their health plan. By tightening up your processes and procedures, you can reduce waste in both materials and time. It’s easy to lose track of unused services, especially if you’ve set them up for auto-pay on your credit card. Operating income is the total profit associated with your company’s operations. Below are the two most important data points that you can obtain through operating costs. Americans are the heaviest paper users in the world, with an estimated average yearly per capita consumption of paper products of 700 pounds per year. Know the biggest energy costs: The U.S. Department of Energy has identified lighting, space heating, and cooling as the three most energy-consuming operations in an office. Understanding them will help you plan for the future and grow your company. The extra work you put in can drastically reduce your expenses. Having an accurate quote can allow you to better plan for anticipated operating expenses. Take a look! dozens of online systems and software programs, offer a discount if you pay your invoice early, Employee health insurance, pensions, and other benefits, What do I know how to do well? While it might seem like hiring an outside vendor will result in spending more money, in the long run, delegating specific tasks to subject matter experts will save you money and generate even better results. Online accounting software like Intuit Quickbooks is a great way to track your revenue and expenses, giving you insight into your business’s profit margin. The formula to calculate operating income is: Operating income = Total revenues – operating expenses. The operating expense ratio, on the other hand, does indicate financial health. 5 Clever Strategies to Scale Down Your IT Costs Fast. Many vendors will offer a discount if you pay your invoice early. By going greener, costs get leaner. Operating Expense Ratio = Operating Costs ÷ Revenues, Based on our example above, we would come up with, OER = $100,000 ÷ $552,000 = .1812 × 100 = 18.12%. Consider providing an incentive to employees for doing so. According to the Occupational Health and Safety Administration, successful health and safety programs reduce injury and illness costs by between 20 and 40%. This will definitely result in cost saving in a long run. If you do find a service that you would like to keep, try shopping around to see if there are cheaper alternatives available. If you find a way to cut two hours a month on the production of a report, that’s 24 labour hours saved every year. Or use your personal device(s) for business as well. Make sure that all equipment is turned off at the end of the day rather than left on standby. While this option may lead to headcount reductions within your organization, it may help your company survive the downturn and reduce costs in the long term. But what is your ideal profit margin?Many business owners have no idea what their profitability should be. Supplying your staff with coffee and other hot beverages is considered a norm in the workplace – whether it is your domestic helper you’re providing these items to, your small office of 5 staff members – all the way up to large corporates catering to excesses of 200 people daily. Maybe it would be cheaper – yet still effective – to organize a video conference at a local facility that provides those amenities. One area that seems to especially benefit from outsourcing is advertising and marketing. December 3, 2020 December 3, 2020 - by mindmingles - Leave a Comment. These three steps alone will lessen paper, toner and storage charges. Doing so will help you better understand your financial statements so that you can improve your firm’s fiscal health. Reducing costs when it will directly impact on employees is a difficult challenge. After defining and explaining the term, we’ll outline a few of the things you can do to decrease your operating expenses. For many entrepreneurs, this is a pain point. It can cut a few percentage points off the bill. For instance, if you don’t have a real estate or tax law background, you may find it challenging to pinpoint ways to reduce your lease payments or property taxes. Follow the steps below and consider developing a formal, comprehensive workplace safety program to help reduce the risk of injury: In terms of work routine, how about adding a day or two of telecommuting? Expensive. Desk-sharing too. If you dream up an idea that saves $1,000, it’s similar to increasing sales by $10,000 (assuming a 10% profit margin). The most direct route to cost cutting is to minimize expenditures. Pore through your variable costs and identify services that you’re no longer using. However, understanding these terms is vital. Copyright © 2020 COGS are the direct costs attributed to producing your business’s goods or services. Eliminating excess costs is equivalent to earning revenue. This can be accomplished by looking for savings opportunities. Reduce business costs by operating in a virtual manner whenever possible. That’s partly because profit margins come in multiple flavors and are often presented in overly complex ways. So, what are the best ways to reduce operating costs? A systematic review of 56 published studies of worksite health programs showed that well-implemented workplace health programs can lead to 25% savings each on absenteeism, health care costs, and workers’ compensation and disability management claims costs. Which margin is the most relevant to your needs?Intuit argues tha… 4. If you have an office space, consider making it as green as possible. For instance, banks have low operating expense ratios, sometimes as little as 0.00%. Unless this can bring demonstrable productivity increases, work with the existing version longer. Whenever making purchases for work, ask to use the company credit card. From teleconference services and online payment services to open-source software and remote desktop applications, there are many ways you can reduce business costs with technology. Operating costs are those required for the day-to-day maintenance and administration of your business. These companies cost way less because of the lower cost … Are you always pestering the boss to buy the latest release of software or newest model of device? You take advantage of paying invoices early and save 2%. Use two-sided copying. If you work with vendors regularly, you might want to set up a bidding system for projects and work. If you haven’t used them in a couple months, look for a cheaper plan or consider canceling them altogether. Even a savings of 2-3% can really add up. Let’s say annual operating costs are $100,000. TED Talk Subtitles and Transcript: By some estimates, work-related stress drains the US economy of nearly 300 billion dollars a year -- and it can hurt your productivity and personal health too, says wellness advocate Rob Cooke. Others, like the building materials industry, have OERs as high as 73%. How COVID-19 is forcing companies to reduce workforce costs. However, we do recognize that reducing expenses is a big challenge, which is why we’ve selected a few tips to help you on your way. Flexible work scheduling may not work for every business, and not everyone is cut out to work from home. That doesn't allow for a lot of savings. Virtual meetings help minimize travel expenses and virtual offices can eliminate the need for physical space. For employers, allowing employees to telecommute can save around $11,000 per employee each year. Technology could improve supply chain processes as well, finding ways to reduce things like the cost of shipping raw materials. The ability to monitor Key Performance Indicators (KPIs) is one of the great pros of using a CMMS. 6. You could end up saving $2,000 a year by doing so. Outsource nonessential work. It can be as simple as making sure the last person who leaves turns off lights and powers down devices. If you find ways to meet or beat the industry average, your business will be successful. Here are some simple ways you can help reduce workplace expenses. Can you come up with any ways to use fewer (or less expensive) materials? Consider allowing your team to telecommute as a way to reduce total costs. Employees will typically also find this advantageous, as they can cut down on their own commute times and expenses. You can reduce your demand during this time by staggering work hours / start times, running heavy equipment and factory equipment during the evening and early morning hours, and conserving energy throughout the day. In 2005, 1.8 million US employees said that they telecommuted for half the week. One of the primary components of operating costs is the cost of goods sold (COGS). Again, you can consider this an investment in your company. Don’t be lazy. Get your pens, ink cartridges, paper coffee mugs, and plastic spoons. Purchase items like sugar and creamer, snacks, cleaning supplies, and Kleenex in bulk instead of individually packaged to lower the cost per unit and reduce the amount of packaging you throw away. Technology allows us to save money and advance our businesses in ways that weren't possible even five years ago. All workplaces spend money. When looking at documents like the balance sheet and income statement, you may come across account terms that you’re not aware of. At the very least, make sure to pay your invoices on time to avoid any late fees or other penalties. Operating expenses also include things like: Knowing how to measure operating costs is important because it allows you to improve your bottom line. To reduce energy usage, replace regular light bulbs with compact fluorescent lighting, look to lower heating and cooling costs by improving your insulation and windows, and cut back on the amount of physical waste. An ounce of prevention is worth a pound of cure. Not only will you save on utility costs, you’ll save on your monthly office supply costs as well. With a recent cost survey by Deloitte showing that 88 percent of companies will be pursuing cost-reduction measures over the next 24 months, effective cost strategies have never been in greater demand. If you dream up an idea that saves $1,000, it’s similar to increasing sales by $10,000 (assuming a 10% profit margin). You should always be looking for ways to make your business more efficient. Someone trained explicitly in this area could help. Don’t print out hard copies where electronic documents will do. As a business, you must have proper IT infrastructure if you are to compete in such a tough market. Leasing office space, paying utility costs, and managing a physical office can be a drain on your financial resources. To choose the right program or service for you, ask yourself the following questions: Hopefully, your answers to these questions will give you a clear indication of the task or subject matter area where you should use technology. Now, at 10,000 units per order, that’s a savings of $4,500. Understanding your operating costs is significant because it allows you to derive many other relevant business figures and ratios. If you’re an entrepreneur who just opened your company last year, you’re jumping for joy. Be sure to compile an accurate scope of work or request for proposal (RFP) for vendors to bid on, as missing information or added complexity can significantly affect the quoted rate. 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