Unfortunately, most businesses don’t get to pocket every dollar that they sell. There are typically a wide range of operating costs and business expenses that must be paid before you get to enjoy the fruits of your labor. Materials, salaries, utilities, rent, insurance, and much more can all contribute to a large budget and lower your profit margins.
While many costs of running a business are necessary there are ways to reduce operating expenses that can boost your profits. You never want budget cuts to sacrifice the quality of your product or service, but it’s important to trim the fat. Here are 10 ways to lower operating costs for retail businesses.
- Automate Tasks
- Lower Expenses by Outsourcing Some Services
- Ask for Different Bids from Vendors
- Pay Bills On Time
- Cancel Worthless Services
- Make Your Business More Green
- Shop Around for Equipment
- Cut Down on Theft
- Find Free Tools
- Keep Inventory at the Right Level
- Travel Less and Work Remote
- Pay Attention to Tax Deductions and Credits
1. Automate Tasks
Many day-to-day tasks can be automated by some basic services. And the more that you can automate, the more time you’ll save yourself and other employees from having to waste. This frees up their time for other things or allows you to cut down the number of hours that you’re paying your staff.
Start with accounting services. There are many affordable services available that can take care of your store’s payroll, taxes, and other accounting issues. Not only does this save time, but it also saves you frustration and headaches. KORONA’s retail point of sale integrates with Quickbooks to make this easy for our customers.
You might also look for automated marketing services for your email campaigns and social media accounts. These allow you to schedule posts and messages ahead of time in bulk so that you don’t have to think about it every day.
2. Lower Expenses by Outsourcing Some Services
While outsourcing tasks and services means that you’re increasing your expenses, they may end up being cheaper than doing them in-house. Many outsourcing tasks can easily be done remotely, so companies are operating overseas in areas with a lower cost of living, thereby making the service cheaper.
- Many small businesses outsource their human resources and customer service departments. For small businesses in retail having an in-house HR or customer service department may not be worth the expense.
- Some marketing services can also be outsourced to cut back on expenses. Many SMBs hire help for their content marketing, website development, or online advertising.
- IT work is another common area for businesses to outsource. Most retailers don’t need an IT person on hand at all times. These services can be called on whenever necessary.
- Hiring can also easily be done by a third-party. Think about using a service to help you narrow down potential candidates for any positions that you need to hire. This will save you a lot of time.
3. Ask for Different Bids from Vendors
Almost any price is negotiable. But many retail businesses don’t take advantage of this. When dealing with vendors, remember to get bids from various sellers. Most vendors sell to retail stores planning on negotiating the price.
Try to negotiate larger quantities at cheaper rates. If you plan on buying a large amount of a single item or multiple items from the same vendor, they will often significantly reduce the price or cut out additional fees.
Be careful not to let this affect your inventory. Many retailers have problems maintaining optimal levels of inventory. Ordering in bulk can sometimes create a glut of slow-moving inventory which ends up costing your business money down the road.
4. Pay Bills On Time
This is standard practice for all of life, and it’s there’s no exception for retail businesses.
Vendors often get fed up with late payments from businesses and will offer a discount on an early invoice payments. Even if this discount is a small percentage, these small amounts can add up to big savings over the course of a year.
Additionally, paying all bills and invoices in a timely manner will prevent you from having to pay late fees or surcharges.
5. Cancel Worthless Services
Again, something that applies to our personal lives as well, it’s important to trim the fat on subscription services.
It’s too easy to forget that you’re making monthly payments on something that you don’t really need or use. Subscription services have become increasingly popular and many retail businesses have many that they subscribe to.
Watch out for software subscriptions, business applications, streaming services, automated marketing, etc. to see where you can cut your expenses a bit.
6. Make Your Business More Green
We’ve already discussed how businesses can lower their carbon footprint. Not only is this the right thing to do, but it can often save you money. Remember, in many cases, savings will add up over several years so you may not notice a big difference immediately.
Start by analyzing your equipment and appliances in your store. If you’re in the market for new equipment, look at items that are more energy efficient. Air conditioners, light bulbs, screens, and display lighting are all common retail necessities that should minimize electricity used. The electricity costs that you’ll save will eventually pay for the equipment itself.
Go paperless with more of your retail business. Most business operations can be done digitally, so push for more paperless operations. Sending digital receipts is a great place to start. Plus, printing in general is expensive; ink cartridges somehow cost as much per ounce as gold and maintenance on printers can be a nightmare.
Find other practical ways to cut back on electricity:
- Put up shading in windows that get a lot of summer sunlight
- Refrain from overhead lights when there is enough natural light
- Encourage employees to shut down computers when not in use
- Turn off and unplug appliances when not in use
Focusing on making your business more environmentally friendly can go a long way towards reducing expenses.
7. Shop Around for Equipment
Speaking of equipment, if you’re not in the market for new energy efficient equipment, take the time to shop around for used appliances.
Coffee shops can find incredible espresso machines that are decades old. It’ll look cool and save you a boatload of money.
Old signage is another great area to shop for cheaper used equipment.
Check out second-hand electronics, too. Used computers, tablets, laptops, POS machines, etc. can all be found at heavy discounts.
8. Cut Down on Theft
It’s important to remember that theft is technically a part of your operational expenses. A stolen item cuts down your margins. All types of retailers deal with both internal and external theft issues and need to address it appropriately.
Get the right security features in your point of sale software so that you set various permissions for each employee.
Set your store up in ways to minimize theft. Follow some basic anti-theft guidelines on store layout, checkout counter area, and signage.
Invest in theft prevention technology to deter thieves. Cameras, sensors, and item tags are all affordable ways to keep items in your store. Investing a bit of money into this will end up cutting your expenses in the long run.
9. Find Free Tools
The internet is a vast place. Explore it and find some free tools out there for retailers. Below are a few areas to look into:
- SEO and marketing assistance
- Data entry systems
- Content management
- Accounting services
- Email marketing
There are many many free tools available. It might take some digging and trial & error but will allow you to cut down on some of your costs.
10. Keep Inventory at the Right Level
This one may seem surprising, but it’s critical to any retail business’s success.
Understocking your inventory means that your business is losing out on potential sales, and also annoying your customers.
Overstocking, though, leaves your store with too much of an item on your shelves or in your storage area. This prevents you from being able to order new products and leaves you with less cash on hand to spend on other areas of business.
A poor inventory management system will end up increasing expenses in other areas of your business. Make sure you have software that works well for your store.
11. Travel Less and Work Remote
Remote work is becoming more and more common for all types of businesses. This might be hard to apply to brick and mortar retailers. Your retail staff, of course, must be present in your store.
But owners don’t need to be! With a cloud POS system, owners and managers can access all business data remotely, so long as you have an internet connection. You can conduct business from your couch, saving you time and money on commuting.
Likewise, the internet allows for virtual meetings instead of having to meet in-person. Reduce the number of business trips you take and set up Google Hangouts instead.
12. Pay Attention to Tax Deductions and Credits
Stay organized with what you’re writing off on your business taxes each year. If you haven’t started this year, start now! Keep receipts for any business expense so that you can submit the expense on your taxes. You shouldn’t pay taxes on dollars that you had to spend to operate your store.
Check out tax credits that might be available, too. There are credits for work opportunity programs, employee child care assistance, environmentally-friendly operations, and a lot more. These can easily be thousands of dollars a year, making a big impact on your overall operational budget.
Reducing Operating Expenses for Your Business with KORONA
KORONA offers point of sale software that can help your business save time and money. Automate your accounting and payroll, manage your loyalty system, make inventory a breeze, set up vendor relations and auto-ordering, run your CRM, and much more. Check it out for yourself. You can set up a free trial in two minutes and play around with the software to see how it works. If you’d like one of our product specialists can walk you through a detailed demo so you can see how it will work for your business.