Reduce Overhead Costs in 9 Smart Steps
The role of the CFO is to help businesses understand the financial implications of operational decisions, but more specifically, which operational decisions are required to improve their overall financial position and reduce overhead costs.
As your business grows, so will your costs. The key to strong cash flow is keeping overhead costs under control. To do this, you need to operate and think like a CFO.
At Rooled, we help our clients manage their budgets and reduce overhead costs whenever and wherever possible. Keep reading to learn our insights into how you can reduce your business overhead costs like a savvy and experienced CFO.
In this blog post, you will learn:
- How to strategically reduce costs without disrupting company goals
- Which tools can help streamline customer service and cut costs
- Why WFH trends and other sustainable work practices are cost-effective
9 Steps to Reduce Overhead Costs
1 – Stay Informed
The first step is always to stay informed. As the head of a company’s financial department, the CFO ensures that overhead costs are kept under control. To do this effectively, a CFO must always be aware of the financial standing of the company and any notable trends. Vigilant financial awareness will help you avoid surprises and make efficient decisions about allocating surplus funds.
2 – Identify Areas of Overspending
A CFO must be able to identify areas of overspending to find ways to cut costs without jeopardizing the company’s long-term goals. The CFO will often work with other department heads to ensure that all costs are carefully considered and prioritized. They also work with other executives to create a budget and track revenue.
Within your company, make sure to communicate with other department heads and managers regarding intended budgets, goals, and other needs that will factor into your overall project costs. Open communication will help you identify areas of overspending and ensure everyone in your company is on the same page.
3 – Spread Out Investments
When a company is growing, it is especially important to spread out investments over time rather than incurring all costs at once. This strategy helps ensure that the company has funds available when needed and avoids putting unnecessary strain on the budget.
By carefully evaluating your expenses regularly, you can help keep overhead costs under control and ensure that the company’s finances are healthy – just like a professional CFO!
4 – Cut Company Expenses Strategically
CFOs are responsible for cutting company expenses without impacting future operations. This can be a difficult task, as many expenses are necessary for the day-to-day running of the business. However, the CFO must find a way to balance the books and keep the company afloat financially.
One way to do this is to negotiate better deals with current suppliers, or to find alternative suppliers who can provide the same products or services at a lower cost. The CFO must also be mindful of future trends and make sure that the company is not overspending in areas that may become unnecessary in the future.
With careful planning and attention to detail, you can help reduce company expenses without compromising future operations.
5 – Streamline & Automate Labor
Any business owner knows that labor costs can quickly add up. In fact, labor can account for as much as 70% of all business costs. That’s why it’s so important to find ways to streamline, automate, and outsource labor whenever possible.
One way to streamline labor is to invest in labor-saving technologies. For example, chatbots run on conversational AI are the must-have technology that is shaking up nearly every industry. Customer service departments can especially benefit from this type of technology, and nearly every industry in 2022 is embracing chatbot technology to streamline labor and improve customer service. Chatbots offer customers highly intelligent self-service assistance, while also freeing up human workers for more complex inquiry support.
According to a study on How to Enhance Customer Service by Using Artificial Intelligence by PSFK, 74% of online users prefer chatbot interactions when seeking answers to simple questions. Additionally, the conversational AI market is expected to eclipse $18.4 billion by 2026. For companies looking for a bit of assistance without needing to hire dozens of workers, a chatbot can do the legwork of dozens of employees – and then some!
It is important to carefully review your labor needs on a regular basis. By taking a close look at your business operations, you may be able to identify areas where you can eliminate or reduce positions without compromising quality or service levels.
6 – Downsize Office Space & Embrace WFH
To further cut costs, consider downsizing your office space or getting rid of your brick-and-mortar presence entirely. In a post-COVID world, work-from-home and flexible, remote work models are the new norms. Companies that fail to jump on this progressive movement end up throwing valuable dollars down the drain. If your company can work remotely without impacting sales or performance, it is time to fully embrace working from home!
Others are taking a more radical approach and eliminating their brick-and-mortar presence entirely, instead opting to operate entirely remotely.
While there are many benefits to going paperless or remote, there are also some important considerations to keep in mind. Perhaps the most important factor is the budget. Operating remotely or going paperless can save a significant amount of money, but it is important to make sure that the costs associated with these changes are within your budget.
Additionally, it is important to think about how these changes will impact your customers and employees. Ultimately, the decision of whether to go paperless or remote depends on your individual business needs and goals.
7 – Balance Efficiency with Sustainability
The CFO must carefully balance the need for efficiency with the need for sustainability. Efficiency is essential in order to reduce costs and improve profits, and sustainability is essential in order to protect the environment and ensure the long-term viability of the company.
One way to do this is to invest in green technologies that will help to reduce the company’s environmental impact. Another way to do this is to implement policies that will encourage employees to be more efficient in their work.
8 – Cut Costs Strategically
Cutting costs is often essential for maintaining a healthy bottom line. However, it’s important to be strategic about where those cuts are made. Removing essential tools or processes can be efficient in the short term, but it’s not sustainable in the long term.
For example, eliminating a software program that is outdated or not widely used can save money in the short term, but if that software is essential for running the business, it will eventually cause more problems than it solves. It’s important to scrutinize costs before making any cuts, and to make sure that those cuts are essential and sustainable. Otherwise, you may end up causing more harm than good.
One of the most important roles of the CFO is to find ways to reduce costs. Eliminating costs entirely can be difficult, and in many cases, it can lead to more expenses in the long run. Finding opportunities to reduce costs can be a much more effective strategy.
For example, the CFO can work with the team to find ways to reduce the amount of money being spent. This could involve renegotiating contracts, seeking out cheaper suppliers, or making changes to processes. By taking a proactive approach to cost reduction, the CFO can help to make their company more efficient and save money in the long term.
9 – Revisit Ideas You Rejected
Finally, the CFO must be experienced in evaluating and approving cost-saving ideas. Ideas that were rejected in the past may now be re-imagined and brought to fruition. Many companies struggle with finding new and innovative ways to cut costs and save money.
However, often the most effective solutions can be found by looking at previous budget cycles. Companies regularly come up with cost-saving ideas, but due to other priorities or lack of bandwidth, they are unable to implement them.
By reviewing previous budget cycles, you may be able to uncover ideas that are now plausible given your company’s current state. Rejected ideas may be worth revisiting, as they could provide significant savings.
Furthermore, by understanding why certain ideas were rejected, you can avoid making the same mistakes in the future. Ultimately, previous budget cycles can provide a wealth of information that can help your company save money and improve efficiency.
Reduce Overhead Costs with a CFO-for-Hire
Even if you aren’t a CFO, you can make financially savvy decisions like one! With the 9 steps above, you are well on your way to making financially informed decisions that will help your business grow and thrive.
If you need expert assistance from a team with decades of combined experience, our experts at Rooled are here to help! We offer CFO-for-hire and outsourced accounting services to help businesses like yours get a handle on their finances, tap into unused sources of revenue, and successfully manage their budgets. Click the link below now to schedule a time to chat!