Reduce Overhead Costs in Small Business

Those who’re trying their luck in the field of entrepreneurship, and are already doing some small businesses, must be aware of a decently vague term, called overhead cost. Though this term may appear vague inherently, it can have a great impact in saving you some precious money when you’re running your business.

Stated in simple accounting terms, overhead costs are business expenses, that are not directly involved in contributing to the profit, but they’re vital to run your business. This may include anything like office space, office stationery, office furniture, cafeteria, etc. For small businesses, extra expenses matter a lot, because capital investment is limited and so maximizing profit and preventing loss is the only key to survival, especially in times of harsh economies and destabilized markets.

Guide to Cutting Your Operating Costs in Business

Regular expenses that are not directly involved in producing goods or providing services are known as overhead costs. It is obvious that you can’t keep your overhead expenses zero. Let us take one example. Electricity is a basic need in the offices, and so you can’t prevent employees from using it! Yes, you can manage electricity usage effectively, and even ask employees to use resources in the office premises frugally. This will in turn lower the overhead costs for your business, saving huge resources of money. Here are some more tips to manage the extra costs.

Enlist Your Business Expenses
Starting a business is not easy, and if you have been in the business world for sometime, you must be aware of the fact that it is a daily battle you need to fight to survive. Hence, you got to manage your overhead costs and be proactive in listing all your business expenses. Now, what you list requires business judgment and understanding. To put things in perspective, consider the fact that you own a small printing press, where the need of computers and electricity is essentially 24 x 7, and so you can’t list electricity as your overhead cost. Some tangible overhead costs in business field are as follows:
Taxation, audits and penalties that, changes in government rules and laws can bring.
To maintain efficiency of employees and provide them all comforts to work, known as ‘downtime costs’, you need to be willing to spend some extra money.
Any changes in bureaucratic and regulatory changes.
Any legal battles and disputes that can result in some court room cases.
Natural disasters and economic downturn, that are inevitable, can cause you to spend some money on the damage done.
In cases of theft or damage of products, you got to pay the extra money.
Any unplanned and unexpected development in infrastructure of the building.