10 ways to... reduce your business costs

1. Cost cutting needs to be managed carefully. While eliminating wasteful activities is clearly beneficial, indiscriminate cost cutting can lead to a reduction in the quality of your products and services, which could result in your losing sales. Cutting costs by too much - or in the wrong areas of your business - can also lead to poor morale among employees.
2. Take a careful look at existing costs in all areas. You need to examine regularly every aspect of your business operations to identify where your attention should be focused. Quick and easy savings are commonly made in staffing, raw materials and supplies, utility bills for energy and water, capital expenditure, other purchases (eg consultancy services and advertising space), premises, telecoms, travel, transport and financing.
3. Eliminate unnecessary costs. Persuade your staff to focus on energy efficiency and adopt simple housekeeping measures. Cut unnecessary waste, such as unused phone lines or heating empty premises at night. Reduce the use of first class mail when an email or fax will do. Use IT to replace time-consuming paper-based systems.
4. Crack down on excessive costs. Set a good example from the top, to encourage staff to support your cost-cutting measures. Ban wasteful luxuries, such as full-fare business class flights, and make it clear that all business expenses must be legitimate.
5. Root out inefficiency. Avoid making frequent small orders where possible. These waste time and might mean you lose out on discounts. Check your supplier invoices for overcharging - common examples include double billing and missing out on discounts. You should also consider switching to single monthly invoicing to cut processing and administration costs.
6. Reduce your payroll costs Consider outsourcing your non-core activities to consultants, freelances, casual or part-time workers. You should also make sure you don't overpay when recruiting new employees.
7. Keep a close watch on the prices of products and services you buy. Be prepared to switch to cheaper suppliers and to negotiate price reductions or higher discounts for early payment. Aim to get the best possible prices by getting quotes from different suppliers and then negotiate discounts.
   Build personal relationships with your suppliers to encourage preferential treatment. Agree long-term supply contracts or guarantee minimum annual purchase volumes in return for lower prices.
8. Review your finances. Finance your fixed requirements with loans instead of overdrafts to get better rates of interest. Get rid of any unnecessary overdraft and loan facilities, and apply for grants and subsidised loans where they are available.
9. Too much cost cutting has its pitfalls. Reducing costs can be damaging. Before making changes, check that your standards will not be compromised and that your ability to meet objectives will not be harmed.
   Cutting certain costs (eg staff training) can be counter-productive in the long-term, by harming employee morale. Moreover, if cost cutting results in poor pay and working conditions, you will be unlikely to retain or attract high-calibre staff.
   If you decide to cut your advertising, new equipment or product-development costs, you might save money in the short-term, but you should be aware that it might result in long-term weaknesses.
10. Hire specialist consultants. Employing specialist consultants on a "no win, no fee" basis can help you to cut costs in particular areas. For example, they might be acquainted with up-to-date benchmarks for your industry and current market conditions for utilities and other suppliers.
    A consultant can make decisions without being influenced by vested interests and historical preferences within your business. If you decide to use a consultant, select one that is a member of an appropriate professional body and negotiate a clear written contract.