Businesses have a variety of variable expenses that must be paid in order to keep the doors open. These include payroll, utilities, rent, supplies, and equipment costs just to name a few. Sometimes these costs suffer from something known as mission creep. That is, they start out manageable until someone decides there’s a little more room in the budget for extra supplies, a few more hours on payroll, or additional rental space. Chances are these “creeps” were made with the intent to help your business rather than hurt it.

The problem is, all of this adds up quick and puts a strain on your budget. Some of the costs might be beneficial, however, even though they’re not generating much of a return. To help you decide which costs are necessary, here are four ways to optimize your expenses while making sure everyone has what they need to do their job.

Keep the Budget Realistic

Sometimes people treat the budget as a suggestion instead of an upper limit to spending, or they don’t think they need to spend every last dime allotted to their department. Then there are times when the money falls short and a trimming of the budget is required. It’s a frustrating reality of running a business. On the one hand, money has to get spent in order to operate, but when people don’t pay attention to their financial limits, it doesn’t get spent properly.

This isn’t to say that you need to lock down the budget and begrudgingly dole out every single dollar when asked for it. Rather, you need to be realistic and flexible. Have a conversation with the over and underspenders. Find out if the overspender is capable of trimming costs and staying within the budget. Talk to the underspender to learn if the extra money is really needed. It may be that the overspender needs a little reminder about fiscal discipline, while the underspender needs to evaluate how much money is really necessary for their department.

The same goes for other aspects of running a business. Find costs and trim them, but do spend when necessary. Sometimes it’s necessary to put out extra cash to hire talent or bring in extra supplies for increased production. Fiscal discipline makes perfect sense, but there are times when that discipline involves making expenditures too.

Find Hidden Costs

Hidden expenses are items that are “lost” under the umbrella of the costs of running a business. For example: The electric bill is consistently on the high end and no one knows why. An investigation to find the issue winds up uncovering unused Uninterruptable Power Supplies (UPS) that are plugged in. The items that were once plugged into them are now long gone, but no one thought to unplug the UPSs from the wall.

Uninterruptable Power Supplies have batteries that are always charging in order to supply power to something electronic during a power outage. Even though nothing is plugged in, these UPSs still draw power and a lot of it. They are creating a hidden cost by increasing power usage without being useful.

Reduce, trim, and eliminate these hidden costs by auditing each department. Find out what they use the most of and determine if there’s a way to lower the use of that item. Put out a directive to conserve and slow down the rate of reorder. Find out if people really need to use certain items, and if not, have them use up what’s left, but don’t order again. Encourage people to change their habits to use less and save instead of spend by rooting out hidden costs.

Automate IT Wherever Possible

Ask any business owner how they feel about information technology (IT) costs and they’ll tell you it’s money they don’t like to spend. It’s not unusual for a business to view IT as a sunk cost with no benefit to the organization. The reality is, IT keeps a business competitive in many ways, and reducing the budget for it can leave a business vulnerable. Instead of looking at IT for cost savings, have your staff come up with ideas for automation.

Automating certain processes frees up the IT staff to spend more time fixing user issues, replacing equipment, and keeping ahead of the latest in security attacks. Things to automate include event log monitoring, password resets, file monitoring, and service restarts to name a few. IT spends less time chasing down problems and fixing them, which makes them more efficient in turn. Software costs for automation are usually a one-time or once-a-year expense, and they generate payroll savings by reducing the amount of man hours needed to deal with common problems.

Outsource to Save Money

Certain processes can put a drag on the finances. The cause might be older equipment that can’t be upgraded due to budget constraints, or it could be that there’s a step in a process that costs too much to do in-house. Usually the thinking is to keep production in-house to save money, but it’s not always realistic, and sending the work outside makes more sense. This is especially true when there’s a product that sells and makes money but doesn’t sell enough to justify making improvements inside the business.

Sending a product or process out to another business can result in money saved for your business. Use an outside vendor that has the capability to perform or create, since it could do something similar and offers the service for much less than doing it in-house. It helps reduce the cost of producing that item and eliminates the need to upgrade equipment for a slightly profitable product. There’s also the benefit of not needing to dispose of the equipment if the product is eventually discontinued.

When you need more money for your business and you’ve done all you can to optimize, contact us at FSW Funding today. We provide alternative funding to help you make it through a financial shortfall and won’t make you wait for an answer. Get money quickly and take care of your outstanding accounts to keep things business as usual.