5 Ways to Reduce Overhead Expenses
Overhead expenses are all costs on an income statement excluding direct labour, direct materials and direct expenses. Overhead expenses often include fees related to things like accounting, advertising, insurance, interest, rent, repairs, supplies, telephone bills, travel expenditures and utilities.
These expenses can add up quickly and have a major impact on the profitability of your business. In order to save money and improve your finances, consider the following tips for reducing overhead:
- Be cost-effective about travel. Travel expenses eat up a budget quickly, especially for smaller organizations. To reduce these costs, consider holding teleconferences instead of flying in off-site employees. Whenever possible, book travel months in advance in order to save.
- Switch your business communications programs. Internal communications services such as Skype or Google Voice can greatly reduce your phone bill. Be sure to conduct thorough research and choose the option that best fits your needs.
- Negotiate rents, as rent is often one of the highest costs for businesses. Thankfully, costs can be reduced by negotiating with your landlord or by moving to a less expensive building.
- Be mindful about utility costs. Electricity and other utility costs can add up quickly, but there are some ways to cut back. LED bulbs use 70 to 90 per cent less energy than incandescent bulbs. In addition, electronics plugged into outlets use energy even if they’re not charging. Consider plugging computers and other electronics into power strips and completely shutting them off at the end of the workday.
- Rent equipment. Renting reduces upfront investments and lets you upgrade equipment easily. What’s more, renting equipment can also result in maintenance and repair savings.
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