Running a business has never been easy, but in today’s competitive environment filled with uncertainty, maintaining profitability is increasingly important.
While it is very simple to go down the route of ‘just bring in more revenue’ as a solution, there are instances where that isn’t always feasible.
The COVID-19 pandemic businesses in Singapore, especially in the retail, F&B and hospitality sectors take as much as a 70% hit in revenue.
Brick and mortar businesses that relied on foot traffic took the biggest financial blow as revenue plunged due to the circuit-breaker measures as well as the on and off lockdown situations, all while still having to pay substantial rent for their premises.
Cash flow is the lifeblood of any company, in fact, it is the cause of business failure 82% of the time!
Sure, SME grants and government reliefs might help in the short term but without a proper strategy to bring expenses under control, enterprises could find themselves struggling month after month to stay afloat.
Thankfully, through effective cost-cutting, businesses will be able to improve their bottom-line, stop wasting money unnecessarily and preserve much-needed cash to better modernise their operations.
Here are 12 ways you can integrate cost-cutting into part and parcel of sustaining and growing your business.
12 Ways For Singapore Businesses To Reduce Business Costs Effectively
Cutting costs isn’t a one and done issue, it is an activity that you can get your entire team involved every quarter.
Some cost-cutting measures will involve 3rd-party spending while others will directly impact your staff and should be implemented holistically with the big business picture in mind.
Let’s dive in!
1. Track Your Expenses Diligently To Identify Areas Of Overspending
Expenses are costs that you incur as you run your business and it could include your office or store rental, employee salaries, the cost of computer equipment (such as laptops or printers) as well as your utility bills.
But before we start tracking expenses, there are three main types of expenses that every business owner should be aware of.
The first is your capital expenditure. These are costs that are incurred by a business in order to maintain or improve a fixed asset. This can include your machinery, vehicles and various office equipment.
Secondly, your operating expenses are costs that you pay in order to run your business on a day to day basis and can include:
- Your office, store or premise rental
- The utility bills
- Employee salaries
- Marketing and advertising spend
- Travelling expenses
Thirdly, is your non-recurring expenses. These are expenditures that are not related to the core operations of your business and might potentially happen a few times a year or on a per-need basis.
This will include interest payments on your debt, excess or expired inventory charges to write off as well as one-time legal costs such as a lawsuit.
Tracking your expenses allows you to immediately pinpoint areas of overspend and helps you to make more accurate decisions on when a cost is business-critical, a good to have or non-essential.
Here are three ways to keep track of your expenses:
A. Create A Dedicated Expense Spreadsheet For Each Expense Type
This will help to consistently log in your expenses and ensure at the end of each financial accounting period, you can accurately track the growth or fall of each expense type.
This makes it much easier for you to see which expenses are growing the most, especially your operating costs, allowing you to address it before it gets out of control.
B. Create A Monthly Budget For Each Expense Type
Budgeting in business is key to ensure long-term sustainability and should be a healthy fraction of the revenue that you bring in.
By setting a monthly budget for every expense type, you’ll be able to reallocate funds if any expense gets too high or if overspending in a period is justified.
C. Have A Dedicated Bank Account Just For Expenses
While you only require a single business bank account to get going in Singapore, having a separate account for your expenses is a good idea.
It allows you to just deposit enough money into your expenses account so that you will be notified if expenditure hits the limit – especially if you have recurring charges that might suddenly increase in price such as software subscriptions.
Tracking your expenses is the first step to effectively practice cost-cutting efficiently and effectively.
2. Benchmark Your Business Spending Against Your Industry Average
Spending varies from business to business and you shouldn’t compare apples to oranges. If you are running a restaurant, you should only be comparing your expenditure versus other F&B enterprises and not a tech company.
This is where industry benchmarks come into play. These benchmarks include technology spending, marketing budget as well as average employee salaries.
For example, according to a study by Deloitte, while the average IT spending for all industries is around 3.28% of your revenue, if you are in consumer retail, IT should only comprise up to 2.04%.
As we mentioned above, there are many components of your business spending, both in recurring and non-recurring costs and each of them will have its own benchmarks.
Your electric bill is another good expense to benchmark against the industry average.
For example, full-service hotels spend an average of $2,196 per available room each year, accounting for 6% of total operational costs.
By benchmarking your spending, you can quickly estimate if your business is overspending compared to your competitors within the same industry, which is rather helpful to see if there are certain costs you can cut to increase profitability.
3. Invest In Technology That Boosts Productivity & Time Management
Time is money, and by utilising the right technology, businesses can increase employee productivity and channel valuable manpower to business activities that generate revenue.
Technology solutions today are abundant and many of which come in the form of software-as-a-service (SaaS) that allows you to harness the full benefits of the tech without you needing to build it yourself and only pay for what you use.
Accounting and bookkeeping is also another big area where SaaS tools, such as Quickbooks or Xero, can help you stay organised with your invoicing, track expenses better and manage your cash flow quicker.
Google’s Workspace is an inexpensive SaaS tool that every organisation can also use for a range of business activities that includes:
- Scheduling meetings both internally and externally
- Storing important documents where every employee can access them
- Create basic financial and inventory reports with charts
These collaboration tools and apps allow you to save precious time, increase business efficiency and allow you to eliminate the need for any manpower or expenses that might be unnecessary.
4. Modernise Your Marketing Efforts To Save On Advertising Costs
Traditional advertising doesn’t produce the return on investment as before and certain on-the-ground marketing strategies today can’t be executed in a pandemic climate.
Instead of relying on expensive paid advertising methods, businesses today should seek to modernise their marketing efforts and head to the digital realm where it is cheaper and much more scalable with lesser resources required.
Alternatively, if you are a B2B brand, marketing on Google search is effective and can be done through both search engine marketing and creating your own blog to drive traffic to your website.
While advertising might give you the push factor and put you in front of your ideal customer, it doesn’t really build credibility.
However, with many channels such as LinkedIn or Google My Business, you can easily get your current customers to write reviews and recommendations for your brand, allowing prospects to view them when they search for you or your business online.
By modernising your marketing efforts, you’ll be able to tap into digital channels that deliver greater ROI while spending only a fraction on your marketing costs and manpower.
Just remember that digital marketing requires both a long-term commitment and a robust strategy as well!
5. Embrace Remote Working & Virtual Meetings
One thing that the pandemic has taught many enterprises (and employees) is that it is not always necessary to have a physical office to conduct business.
With a multitude of collaboration apps and virtual technologies such as Zoom, Microsoft Teams, and Google Hangouts, holding internal meetings with employees or external sales calls with clients can be done rather effectively.
While this isn’t to say there isn’t any value in face-to-face interactions, capitalising on remote working & virtual meetings allows you to save on your travel expenses and physical office space – which can add up to quite a big expense every month!
In today’s pandemic environment, remote working will likely become the norm as we move towards a new normal. However, that doesn’t mean productivity will drop during meetings.
Virtual meeting apps not only allow you to hold presentations but also facilitates big meeting sessions such as town hall meetings.
6. Save On Your Electricity Bills
Every business has a multitude of operating expenses that can be reduced or cut, but no matter the industry you are in, you cannot eliminate paying your electric bill.
However, in Singapore, there are certain steps you can take as a business owner to save on your energy costs!
The first is to practice good electricity saving habits throughout your business premises. This includes:
- Installing energy-efficient appliances such as air-conditioners
- Utilising LED lights instead of incandescent bulbs
- Reducing sources of sunlight to reduce the need to overwork your air conditioning
- Use smart plugs and lightings that you can control through an app
The above strategies will undoubtedly help you save on your energy usage, but there will come a limit where reducing your electricity consumption will make running your business unfeasible, especially if you are in the hospitality or food & beverage industry.
Thankfully, with the liberalisation of Singapore’s electricity market, businesses can now purchase their electricity supply from a retailer and enjoy guaranteed savings off their energy bill!
This means that no matter how long or frequent you use electricity within your business premises, you will lock in significant savings month after month.
At iSwitch, we help businesses save on their electricity bills and we go beyond that with flexible contracts as well as a mobile app that helps businesses review their consumption trends to monitor their electricity usage for better optimisation.
7. Focus On Quality Vendors & Products
As a growing company, you are likely to outsource various parts of your business operations to external suppliers, service providers and vendors.
This can include digital marketing services to a social media agency, payroll and accounting to an HR firm as well as recruitment to a headhunter.
While it is tempting to either jump ship at the first sign of trouble or spread out your operational needs across various vendors, it poses challenges that could actually drive up your overall costs.
Not only will you have to dedicate a staff member to manage them, but you might also encounter conflicting quality issues as well as juggling timelines and deadlines. This not only adds a layer of complexity to your business processes but also lowers productivity.
A good alternative is to narrow down your procurement process and focus on quality vendors and products.
This is even more pronounced when it comes to enterprise software products, a single vendor here is critical to minimise compatibility problems, enjoy faster deployment and greater accountability when it comes to troubleshooting.
By doing so and growing with a few trusted suppliers, you get to build trustworthy relationships of reliance and understanding that will not only benefit your bottom line but also protect your brand.
Just be sure to go beyond just the price when assessing a vendor and look out for key traits that include:
- The quality and comprehensiveness of their offerings
- Customer reviews and testimonials
- The level of customer service
- Existing relationships that you can potentially leverage on
You should also ideally ask for quotes from several vendors as well to compare and if you are sourcing for a software solution, be sure to embark on a free trial to get an idea if the service is suitable for your needs.
8. Defer Pay Increases & Bonuses To A Later Date
Employees are crucial to the growth of the business, however especially in tough times, this relationship goes both ways.
When revenue is harder to come by and the very survival of the business is on the line, employees and team members will have to make some financial sacrifices.
There are a few ways to go about it in a fair and respectful way.
The first is to defer pay increases and hold down bonuses to a later date. This is a strategy that Singapore’s civil service uses to keep down costs during a difficult period, especially in 2020.
The other way is to cut down on your employee’s working hours and respectively reduce their compensation. This strategy allows you to be fair with your team while preserving much-needed cash for your business.
Cost-cutting, especially when it comes to salaries, isn’t easy, but it is an essential consideration that business owners should consider for the bigger picture.
9. Cancel Unused Services & Pay Invoices Early For Discounts
If you look through your recurring business expenses, you’d likely see a whole host of services that you are paying for but hardly use.
This can be a software subscription that hasn’t been used or a corporate gym membership that is under utilised.
A good strategy to take is to ask yourself if you have used a certain service in the last 90 days and if it was mission-critical to your business survival or delivering your solution to your customers.
If it isn’t then you have two choices – either renegotiate with your vendor for a better rate or just eliminate it.
Another rarely utilised strategy is to pay invoices early with your vendors for a cash discount.
Cash flow is just as important to you as it is to your vendors and many will be happy to give you a discount of 2 to 3% if you pay early. This amount, while seemingly insignificant, does add up to quite an amount of savings.
10. Go Paperless Where Possible
It’s 2021, most of our communications are digital and going paperless is a step towards the future of business.
While it’s easy to argue that this is a minimal expense and paper documents are great for locating physical copies of important files, the digital benefits far outweigh the cons.
Firstly, by switching to a digital invoice and payment system, you can immediately get your client’s electronic signature seamlessly and file it away without having to either visit them physically or send the documents through mail and wait for days for them to be returned.
Secondly, using paper doesn’t just incur the cost of mailing supplies and the paper, you’ll also need to consider the cost of a printer-photocopier that could easily cost thousands of dollars!
By going paperless, not only are you reducing your business costs, but you’ll also be doing your part for the environment and saving more trees!
11. Reduce Your Corporate & Credit Card Debt
Cash flow is undoubtedly important and you might be resorting to taking on corporate loans from banks or maxing out your credit cards to stay afloat.
Yes, this will help you stay solvent in the short term but the long term effects might be disastrous, especially if you are borrowing out of your means or against your invoices which have yet to be paid.
You need to keep your debt in check and reduce it as much as possible.
Firstly, you’ll need to identify your good debt versus the bad debt that your company owes.
Good debt is debt that is servicing a liability that will pay off dividends in the future, such as product development or employee salaries that are essential to delivering a service.
Bad debt, however, is debt that is not backed by any collateral, is spent on an unnecessary expense and has a high-interest rate.
The next step is to eliminate your bad debt as quickly as possible.
This means prioritising paying down your high-interest debt and start renegotiating your existing debt arrangements with lenders or even hire a debt-restructuring firm.
In this tough economic climate, creditors and lenders will be more willing to open dialogue and potentially reduce your interest rates or defer payments as long as they paid in the end.
The key here is to establish open communication and have an honest conversation on how to work together to reduce your debt obligations.
12. Buy Refurbished Equipment & Furniture
We all love new things and the same likely goes for our business equipment and office furniture.
However, buying them brand new off the shelf at the retail price can quickly balloon to a big business cost.
Thankfully, you can maximise comfort and business productivity by purchasing refurbished equipment and furniture at a fraction of the price!
Hock Siong and Second Charm are two second-hand stores where you can get a variety of vintage and restored furniture at very reasonable prices that will be a perfect fit for your office.
When it comes to electronic equipment such as computers, monitors, and tablets, you can head to Laptop Factory Outlet or Carousell to hunt for good deals.
So save on those extra dollars and buy your equipment refurbished, you’ll get them working just fine while paying much less.
Start Cutting Costs With Guaranteed Savings On Your Electric Bill
Cost-cutting is a necessary step for businesses to preserve cash for their operations and to help accelerate further growth when the opportunity arises.
While the above strategies all work and add value, the fastest way you save money is by saving on your electric bill – and at iSwitch, this is where we can help!
We have helped over 10,000 businesses across various industries and sizes save on their monthly electric bills hassle-free.
Simply call us here at +65 6955 9900 and our specialists will be in touch to help guide you through the process to switch to iSwitch!
You can also learn more about our commercial price plans here.
Keep in touch and join our mailing list to receive our monthly newsletter!