If you own, run or manage a small business, reducing cost is a critical function. So what is some “low hanging fruit” that can help in reducing cost? Many expenses, which are usually the greatest, relate to employees and payroll. Quite often, a close review will reveal wasted resources. We’ll never recommend that a manager or owner become a penny-pinching ramrod who follows employees around shutting off lights and and digging in trash cans looking for evidence of inefficiency, but there are a few key areas to look at.
If you have a business type that exposes employees to potential injury, safety is king, and key in reducing cost. Tightening up on safety by implementing effective risk management procedures and safety standards can yield significant savings by reducing worker’s compensation costs. Work Comp insurance is not cheap, and your experience mod increases pretty much any time you have a claim. Rack up a few injuries, and rates can quickly go through the roof. Prevention is profit.
We’re in the staffing business, so this may seem a shameless plug, but it’s a fact. Hiring temporary workers, or using a temp to hire strategy, instead of directly hiring employees can significantly reduce cost. This is especially a smart move if you have seasonal or varying demand fluctuations. Why be overstaffed when you can be perfectly staffed? With temp to hire, you can boost your effective hire rate to over 90%. Why pay unemployment, clog your books, and hassle with year end reporting on employees who only lasted a month or two? (or less) Same is true with benefit costs.
If you offer them, evaluate your benefits plan and the costs. I’ve known companies to improve the benefits they offer employees, and reduce cost at the same time, by simply taking the time to evaluate things and change vendors. In that scenario, everyone wins. Properly educating employees on their benefits options pays too. Sometimes workers select coverage or options simply because they haven’t fully evaluated things. If you can help them save money, and save your business money at the same time, it’s a win/win.
Printer/Copier paper typically runs cheap….. 1-3 cents per sheet. The EPA estimates that the average office worker uses about 10,000 sheets of paper per year year. At 2 cents each, that’s an easy $1,000…. multiply that by two or three workers (or 100), and you can easily burn through a few thousand bucks on paper alone. Most of that money just ends up in the trash. On top of the paper cost, you have toner, cartridges, equipment, etc. This is 2019. Printed paper and fax machines are becoming outdated. In ten years, you won’t even hear the word fax. By moving towards a paperless system, you can get rid of file cabinets (gain space), and stop wasting all that money on ink, toner, printers, copiers, and paper. Year after year, it adds up.
Evaluate your turnover. If it’s high, there’s a reason. Find out why. The fact is, the hidden costs of turnover are far more dramatic than one might realize. Just because accountants can’t easily quantify it, and add a line item for it on the P&L, does not mean it’s not a cost. Quality, attendance, training, morale…. they’re all critical facets. Understanding the needs of your workers, the social dynamics, and what’s going on behind the scenes is critical. A manager or owner can’t do that if they’re “too busy” to be “plugged-in” and too self-important show genuine interest in workers. Reduce your turnover, and you’ll increase your profits.
How many hours a month are you paying workers to not work? Owners and managers who fail to properly control workplace distractions and keep people on task are routinely getting fleeced. Yes, hiring great workers is a solid start, but given enough wiggle room, even good people will waste valuable time. Time is money. It’s actually been estimated that over 50% of employees waste an hour or more at work every day. Social media has become their second-biggest time waster (after news sites). It’s estimated that around 30% of the workforce uses social media for at least an hour every day. It’s estimated that nearly 50% of employees get interrupted at least twice an hour and nearly 60% of those interruptions involve cell phones, spam e-mail, or social media. An hour lost a day, can easily equate to $10K+ in lost productivity per person, per year. It’s significant, and it pays to have controls in place. Once again, you don’t have to be a jerk, but you do need to set boundaries, and apply intelligent controls. Everyone wins when you do.
Running a business is always a challenge, and the general push is often, “we need more sales!”. While that always helps, reduced cost yields increased profit, and it pays to keep that in mind. If WorkSource can ever be of service to you, just reach out to us. We’d be glad to talk with you.