Amid the recent period of economic fluctuations, cash flow is a big challenge for almost half (46%) of SMEs. Besides turning to loans and subsidies, many (29%) try to find ways to save money. But which way would you go – cutting costs or optimizing business spend?
Cost reduction is a raw dollar-pinching approach with the key objective of cutting necessary and/or unnecessary expenses. For example: switching off the air-conditioner after working hours or using compatible toners for MFPs (Multi-Function Printers). While this approach delivers immediate savings, these may not be long-lasting, may fail to account for outlays associated with additional maintenance, and may possibly bring about further costs down the road.
Spend optimization is a more holistic method to budgeting that looks beyond the upfront dollar spending. Instead of switching off the air-conditioner right after office hours, you could choose to monitor weather conditions through an energy management system and automate the power supply based on real-time needs – thus providing a pleasant workspace whenever your staff are working. By strictly adhering to such cost optimization strategy, long-term and sustainable savings can be achieved.
A.K.A the total cost approach.
While 63% of SMEs in Hong Kong had been expecting an upcoming increase in raw material costs, 24% plan to spend more on IT investments. By leveraging the popularization of advanced technologies, the IoT (Internet-of-Things) and cloud services, SMEs can optimize operations via a framework of smart workstyle - reducing costs and optimizing spending in one fell swoop.
1. Save electricity
Powering down unnecessary lights, appliances, and machinery after working hours or at unused areas could generate a trickle of savings. Use a timer or smart sensor to help you turn things off. Use laptops instead of desktop computers to save up to 80% electricity. Replace old appliances with energy-efficient ones.
2. Reduce waste
Reducing waste can lead to both environmental and financial improvements. You might think that the price of paper, toner, and postage is minimal, but things can add up to unexpected amounts if you are not careful. Overestimated inventory and printouts will only clutter up your office space.
3. Reduce office supplies and utilities (physically and digitally)
Many teams and departments buy similar supplies, such as conference speakerphones, and use similar online tools, such as files-sharing platforms. Reduce spending on these duplicated assets and combine purchases for greater bargaining power and cost reductions.
4. Reduce service costs to align with usage
Carefully plan your needs and capacity under your service plans, which should be reviewed regularly. To avoid paying too much, use services that offer pay-as-you-go pricing models giving you the flexibility to scale up or down according to your needs.
5. Save travelling costs
Most people have gotten used to virtual meetings during lockdowns. Continuing this practice with your business partners either at home, in different offices or cities for quick catch-ups could save up to 32% of day-to-day operation cost on business travels.
6. Allow remote work to save on office rent
Meme platform 9gag adapted the WFH-forever policy to save over HK$200,000 in monthly rent on its 7,000-sq-ft office in Tsuen Wan. If your business operations can be conducted remotely, consider reducing your on-premises workforce and use a smaller office or none at all.
7. Look up in the cloud
In order to make a less-cluttered office, shift your documents to a virtual space. A NAS (network-attached storage) or cloud drive would take far less storage space than any pile of paperwork and would also offer way more security than a safe. Need we mention that Hong Kong ranks on top of the world’s most expensive office markets?
8. Consolidate incidentals
You can combine corporate activities into single events across multiple departments to save on the average spending. Investing in a single device with multi-functions and a variety of features for higher performance might also save you extra dollars and space.
9. Use shared office / co-working space facility
If you cannot send everyone home and require a physical office, you might as well consider moving to a shared office or hiring a co-working space. Not only could you trim leasing costs, but you could also pay according to your actual usage of common facilities while enjoying many complimentary amenities. Meanwhile, you can save on replenishing the pantry with snacks and coffee and on engaging washroom cleansing services without sacrificing your employee experience.
10. Subscribe (or rent) rather than buy
If there are things you don’t need to own, don’t. There are many legacy technologies that are quite costly to keep up to date, such as the document processing and designing software we all used to purchase. Subscriptions might offer a lower total cost of ownership than all the hidden expenses such as maintenance, support and license that add up during the product lifecycle, and a better value in the long term. An expenditure distributed over time can also free up your capital.
11. Adopt a BYOD (Bring Your Own Device) Scheme
Just like the many companies that subsidize their staff’s service plans rather than provide them with a company’s phone, give allowance to employees for using their own computer devices, which reduces your capex and allows them to use the model of their choice. You can deploy virtual desktops for a standardized working environment to safeguard your business information and enable IT management.
12. Invest in management tools
Having a better understanding of your performance and what drives your ROI is more valuable than cutting costs indiscriminately. Leverage management tools to help you monitor your daily operations and get insights from reliable reports for making smarter business decisions. Many tools covering different areas are available - you will find them useful and fit to relieve your workload.
13. Boost administration efficiency
Administrative processes often run “as usual” with diminishing efficiency over time. Consider simplifying approval steps and/or removing unnecessary meetings – human interventions could be eliminated or taking place virtually. For example, switch to a digital contracting and accounts payable and receivable management platform to reduce recurring business costs.
14. Increase employee productivity
There are many time-consuming tasks that are not really necessary or can be done by robotic automation to free up to 90% of your employee’s time for more productive, profit-generating work. Increasing individual productivity could reduce the occurrence of overtime pay and the need for more personnel.
15. Outsource non-critical tasks to experts
Let’s face it – there are many things we are not good at, and hiring an in-house expert is costly. And then there are tasks that simply take too much time and manpower to perform. Forbes suggests businesses should focus on their core missions and outsource subordinate functions for troubleshooting problems and ensuring quality. Not only could you cap your fixed staff costs, but also pay for services and freelancers only when you require them.
With a little imagination and experience, you can find more ways to save your business time and manpower using less funds while improving business outcomes. Furthermore, as Gartner suggests, take advantage of technology popularization at a lower cost and with a shorter implementation time to add value to your business. It always helps to talk to fellow entrepreneurs and learn from their experiences about the best ways to save money. After all, greater efficiencies always generate meaningful financial savings in the long term.
