No matter what they do or what markets they serve, all companies have to worry about their overhead expenses. These are broadly defined as any costs not directly associated with the production of goods. For example, the cost of parts to build a toaster does not fall under overhead, while the lease on the warehouse where they are stored does. The cost of shrink wrap used to package items is not overhead, but the paycheck of the employee who wraps them is.
Supply-based businesses rightfully spend a lot of time trying to keep their costs under control in terms of their operating costs, but many of them neglect their overhead until it’s too late. Here are some tips you can use to rein in your overhead costs so you can continue to be as profitable as possible.
Adopting sustainable practices does more than help reduce your impact on the environment. Even something as simple as controlling your property’s lights with motion sensors or timers can save you a lot when your utility bills arrive. The larger your operations are, the bigger the potential savings. Converting to a paperless office cuts down on waste, boosts efficiency, and reduces your office supply expenditures.
Automate Your Processes
The old-fashioned methods of processing payments and other types of paperwork add a lot to your overhead. Embracing software that can digitize and automate accounts payable and other tasks make your enterprise more efficient. With most of the tedious work taken off your staff’s shoulders, they are freed up to take on more important jobs and you can enjoy a leaner, streamlined office.
Watch Your Vendors
You may believe your existing vendor contracts are good enough, but when was the last time you took a close look at all your options? There’s a good chance you may be missing out on a more advantageous deal through simple complacency. This begins with the development of a strong vendor management strategy, so now is a good time to start if you don’t already have one. If you do a little digging, odds are you can find someone who will offer you a better deal than the one you have now.
Review Your Insurance
Your company most likely needs to carry some form of insurance, but you don’t need to spend more than is absolutely necessary. Take the time to look over your existing coverage and see if there are any policies that are excessively expensive, outdated, or otherwise unnecessary. Pruning any that cost more than they are worth could give you some significant breathing room in your overhead.
Your company’s overhead is essential, as it literally keeps the lights on for you. However, that doesn’t mean you have to be burdened with excessive costs that make it more difficult to turn a profit. If you’re wondering how you can boost your bottom line and put yourself in a better position for the future, a deep dive into your overhead expenditures may be what you need. Follow these tips, and you’ll be well on your way to becoming more successful.
About the author
Jennifer Ulrich is Senior Director of Advisory at Corcentric, a B2B payment solutions company. Ulrich is a transformation advisory and strategic sourcing expert with more than 10 years of experience leading large-scale organizational improvement and sourcing initiatives. She specializes in designing customized maturity assessments for procurement and AP organizations of all sizes, and in developing actionable roadmaps to realize sustainable transformations.