32 Fantastic Cost Cutting Ideas for Businesses
Many businesses are going through tough times. Fewer customers are walking through the doors, and even when they do they spend less than before. Suppliers are either taking longer to pay, or even defaulting on payments altogether. Business loans are much harder to come by as lenders tighten their credit taps, strangling access to working capital and funding for growth. With weak consumer demand likely to persist for the foreseeable future, it’s natural for business owners in Singapore to consider how they can reduce their company expenses. We’ve put together a comprehensive list of 32 great cost cutting ideas for businesses that you can use to reduce your expenses, and pull through these challenging times.
#1. Replace paid advertising with organic marketing
Many businesses will buy paid advertising on Google, Facebook, Instagram, online news sites, and other media channels. Now, paid ads certainly have a key role to play to attract leads and to raise brand awareness. However, paid ads are only one component of a business’ overall marketing strategy, and should not be the sole means through which you acquire customers. If you’re trying to reduce business expenditures without having an impact on your revenue, then it is absolutely vital that you invest in non-paid streams of marketing.
Many SMEs fail to invest in attracting organic traffic to their businesses. Organic traffic are leads that visit your website or get in touch with you through non-paid marketing channels. Examples include Google searches, word-of-mouth, and referrals. The first of these – Google searches – is the most widely used. To attract organic leads through Google searches, you have to perform what’s called Search Engine Optimisation (SEO).
SEO is a process where you calibrate multiple aspects of your website to maximise the probability of ranking in the first page – and preferably in the top 3 positions – of Google searches. For example, let’s say you run a cleaning business. Your target audience would be people searching for “cleaners for hire”, or “cleaners in Singapore”, right? Instead of buying Google ads for these keywords, you can perform SEO to maximise your website’s ability to appear at the top of the organic search results for these keywords.
Basic SEO techniques include:
- Focus your website’s keywords on the searches that you want to rank for. If you want to show up tops for searches like “cleaners in Singapore”, then make sure these keywords are found repeatedly through your site. Make sure to write these keywords naturally, and not force them in, as Google’s algorithms can tell if you’re spamming keywords.
- Create lots of content. The best way to rank for multiple keywords is to generate content like blog posts, guides, and other helpful articles that people will want to read. As you start attracting traffic to your website, Google will recognise that your site is valuable to users, and you’ll progressively rank higher and higher for those keywords you’re focusing on.
SEO is an incredibly involved topic, and the above tips are just the tip of the iceberg when it comes to optimising your website for organic traffic via Google searches. Read more comprehensive guides on optimizing SEO here, and creating content here.
#2. Manage location costs if you rent commercial properties
If you’re renting a commercial space, you’ll want to analyse whether the location you’re in is providing you a sufficiently attractive Return on Investment (ROI).
If you rent an office space: you should consider whether there’s really any need to even have an office. The current environment has forced many business owners to reconsider the need for a physical space altogether, and to move interactions online. If you have a small to medium-sized team, face-to-face meetings can still be conducted in free spaces like cafes. Not having to pay rent will free up quite a significant amount of overhead spending. If you absolutely still need a physical space, consider moving to a less expensive office location if possible. For instance, if you’re in the Central Business District (CBD), consider office locations in the suburbs or in industrial parks (e.g. Bedok, Jurong, Paya Lebar, etc.). Rents in such areas of Singapore can be 20-50% cheaper than in the central district.
If you rent a retail/F&B space: you should perform a thorough cost-benefit analysis to determine whether the rental costs of your current location are offset by the foot traffic generated. For some businesses, even being located in a prominent location (e.g. on the first floor of a mall, with direct line of sight to the main entrance) is not enough to draw in sufficient foot traffic. Such prime locations come with premium rental rates, so if the location isn’t generating sufficient returns, then you should consider moving to another less expensive spot.
#3. Only buy in bulk if it makes financial sense
You can almost always get a bulk discount from your suppliers if you order sufficiently large quantities of goods. However, given the weak level of consumer demand, you’ll need to re-evaluate whether you can actually make use of all the products or services that you order in bulk.
Large amounts of inventory may reduce your per-unit costs, but are you sure you’ll be able to sell your stock in a timely fashion? Remember that you’ll need to sell this stock within 60-90 days to meet payment deadlines from suppliers, pay your staff, and clear all sorts of other bills you may have. If you’re selling perishable goods like food, the urgency to clear your stock is even more pressing. A weak demand outlook will make it significantly harder for you to quickly turnover large amounts of inventory.
Do a proper analysis to determine how much inventory you can realistically clear within a set time frame. Don’t be tempted to order more than you can sell, even if the overall cost is lower. You might end up initially saving some money on the bulk order, but if you can’t sell your goods then they’ll only end up increasing your expenses.
#4. Re-evaluate employee perks and benefits
This is one of the best ways to trim expenses, and should be top of mind when considering cost cutting ideas for businesses. Ask yourself: are all the benefits you provide absolutely necessary? Are you granting overly generous benefits? Perks like subsidised meals, a fully-stocked pantry, subsidised travel, and employer-sponsored healthcare might be great, but when added together they can start to become a really expensive burden for the company.
You’ll need to evaluate which benefits are the most essential to attracting and retaining talent. The first to go are the “nice-to-have” benefits like meal and travel perks. Consider limiting how much money your employees can claim for business meals and travel. More impactful benefits – in particular health insurance – should be relooked. You might want to consider downgrading your plan to more basic coverage, which allows your employees to still obtain healthcare, without costing the company too much money.
#5. Outsource and leverage freelancers
One of the best cost cutting ideas for businesses is to re-evaluate the way manpower is structured in the company. You don’t have to hire employees to complete work. With the digital economy, it’s often cheaper to outsource non-key tasks to outsiders to complete.
For instance, outsourcing IT development can result in significant savings for your business. It’s not just traditional IT centres in China or India that you can use. Many businesses in recent years have begun outsourcing to Vietnam, where IT costs are even lower than traditional bases like China or India. Going rates for a full-time software engineer in Vietnam can be as low as $300-500/month per worker. For comparison, hiring a full-time engineer in Singapore can easily cost $4,000 to $6,000 – and that’s for a junior level programmer. Given this disparity in cost, it’s no surprise that so many companies are offshoring their IT teams. With lower costs, companies are also able to hire many more engineers, which allows firms to push out mew products and services faster. This can produce a double benefit for businesses – decrease costs, while increasing revenue.
Marketing work can also be readily outsourced. There are a plethora of skilled marketers who can design marketing campaigns for you, monitor the results, and provide detailed reports of the campaign. These freelance marketers can also perform UI/UX design on your website to drive traffic, increase conversions, and improve the overall customer experience. You still retain control of the overall marketing direction and top-level strategy, while the freelancers help you perform the vast majority of the marketing legwork. Usually, hiring full-timers to perform this legwork would cost most companies more money than outsourcing.
#6. Digitise legacy processes with software
You should perform a review of your operational processes. Are there procedures in your company that are more labour-intensive than necessary? For instance, are you using a simple Excel spreadsheet or a Customer Relationship Management (CRM) system to keep track of customer accounts? Spreadsheets might be OK for startups with a small customer base, but it’s going to quickly become very labour-intensive to keep track of all customer interactions without more sophisticated software in place. For CRMs, look to renowned providers like Salesforce, Zoho, or Hubspot. The initial set-up cost and subscription cost may be somewhat high, but don’t let this deter you. In the long run, you’ll save money by freeing up your employee’s time to do more productive tasks like generating new sales.
For automating routine admin tasks, AI assistants can come in very useful. Tools like Evie help you automate email replies, calendar scheduling, booking appointments, and other mundane things. This helps you free up more time to concentrate on the work that really matters.
#7. Conduct regular performance reviews and let underperformers go
It’s important to regularly measure performance, and let go of the employees who just aren’t performing well. We get it – it’s never easy to let employees go. When faced with the prospect of having to let workers go, managers and owners often have difficulty making the hard choice on letting people go. Especially in SMEs that operate with leaner teams, close working relationships can develop that make it harder to separate business from emotion. However, do remember that the business still has to support all your other employees – if the entire company goes under, you’ll put even more of your employees’ livelihoods at risk.
#8. Maximise employee productivity to get the most bang for your buck
If you’re trying to make your business more lean and cost-efficient, then each member of your team needs to bring their best every day. To do more with less, you need to ensure that your employees are as productive as possible. Consider using time tracking applications like Paymo or Time Doctor. These applications help to track how your employees’ spend their working hours (e.g. are they spending time making new sales, or making new friends on Facebook?). Before you think this is a gross invasion of privacy – hold up. Time tracking tools aren’t meant to simply be intrusive electronic big brothers that allow micro-managing bosses to snoop into every last thing their employees did. Time tracking tools can provide powerful insights into whether your employees are spending their time on productive tasks, and whether or not the organisation’s processes are allowing employees to perform effectively.
If, for instance, you see via a time tracking tool that your employees are spending alarmingly large chunks of time doing up reports or chasing after customers for payment, then that’s a clear sign that you need to streamline those functions. You can reduce the reporting requirements for your employees (or provide simple templates for them to quickly fill in), and as for payments you can use free software like Xero to send automated payment reminders with electronic invoices. Time trackers can therefore serve as very useful tools to identify productivity gaps in your organisation, allowing you to fix them before you suffer losses or have your employees turn frustrated.
Time-tracking software is also very useful if you’re paying certain employees or freelancers hourly. In such scenarios, time-tracking tools help to establish transparency and fairness. You’ll know exactly how many hours your freelancer worked on their assigned task, and there won’t be any disputes over hours worked and payment later on.
#9. Control and standardise “general” or “miscellaneous” spending
Sometimes, different departments will buy the same equipment. From basic things like office supplies to more complex things like equipment, there can often be overlapping purchases if communication across departments is not sufficiently strong. Establish a central purchasing workflow where all purchases are reviewed from one location. This will allow you to spot any duplicate purchases.
#10. Use a business credit card to pay for expenses
If you’re still paying by bank transfer or cheque for business expenses, stop! Using a business credit card for expenses is often very useful, because charges to your card help you rack up points that can be redeemed for rewards. Common rewards include cash vouchers, travel miles (best saved for after the pandemic), gift redemptions, and more. Also, depending on the card you use and the type of expense incurred, you may qualify for cashback (e.g. anywhere between 1-3%), which helps reduce costs even further! For instance, the Aspire Corporate Card in Singapore provides business owners a host of benefits:
- 1% cashback on all marketing and SaaS software spend
- Zero foreign exchange transaction fees
- Account approval within 2 hours, virtual credit card issued upon approval for immediate use
Be aware that some cards come with annual fees or minimum spend requirements, so make sure you look into those requirements first before signing up for anything.
#11. Pay invoices early if discounts are available
Suppliers will often give discounts for early payment of invoices. For instance, suppliers may extend terms of “2%/10 net 30” – this means you get a 2% discount if you pay within 10 days, otherwise the full amount is payable within 30 days.
Of course, early payments do impact cash flow, so consider the impact it will have on your internal cash position. As long as it doesn’t burden your cash flow, it’s a good idea to take advantage of these discounts as you can save quite a bit in the long run with early payments.
#12. Don’t rack up late fees or interest payments
This sounds obvious but it’s surprising how many businesses will make late payments on credit card bills or other expenses, and end up having to pay late fees. Also, if growth at your business isn’t strong, try to limit the amount of debt you take on. It’s not always easy to avoid debt (e.g. to fund working capital), but in a weak demand environment, limiting the amount of interest payments is important to extending your operating runway. Interest payments could be used for more handy purposes like funding sales and marketing efforts to generate more sales, for instance.
#13. Relook rejected cost-saving ideas
Cost-cutting exercises are a good time to dig up old expense-reduction ideas that were previously rejected. Maybe the ideas weren’t exactly relevant when they were proposed (perhaps because the business environment was different), but in the current economic landscape such ideas may be newly relevant to management. Have a look through these proposals – at worst, they just get tossed in the bin again. The best that could happen is you get an idea that’s been previously worked on, and could provide you a new breakthrough in expense reduction.
#14. Cut spending on department management
Have a look at the functions of your different teams or departments. If the roles of each team/department hasn’t changed significantly in the last year, then they probably don’t need the same degree of management/supervision now. Management consulting studies have shown that when functions and responsibilities have not changed significantly, departments often spend 10-25% more on management activities than they need to.
#15. Eliminate duplicated work
When analyzing projects, it’s common for multiple departments to analyse the same project from different perspectives – e.g. marketing, sales, operations will each perform analyses from their own angel. However, this often means that basic-level analyses are duplicated across different functions. Ensure that different departments are coordinating with each other on the basic analyses, with only the function-specific analyses being performed by each department.
#16. Make more efficient use of meetings
Meetings are a real time vampire, and it’s no surprise that one of the top complaints that employees have about their workplace is a deluge of meetings. Being in video meetings can be even more tiring than in-person meetings, given distractions like background noise, grainy video feeds, and muffled mics that make communication (ironically) more difficult than it needs to be. Make sure that each meeting you organise has a clear agenda, and everyone should come prepared to discuss their work. Meetings should only be scheduled to achieve defined objectives – if there isn’t a clear goal, then the time would be better spent allowing employees to catch up on their work and produce results for the company.
#17. Turn off all non-essential equipment after hours
You can save large amounts on electricity bills by powering off all non-essential equipment. Computers, lights, and other devices should not be plugged in if they are not mission-critical to the business’ operations. Business surveys have found that computer workstations are one of the biggest contributors to utility bills in most offices (besides air-conditioning), so turning off the power is a great way to cut back on utility overhead.
#18. Buy second-hand where possible
Don’t be afraid to buy second-hand goods that are in good condition. Examples include furniture, certain office peripherals like printers, stationery, and other fixtures.
#19. If you operate company vehicles, opt for fuel-efficient models
Fuel-efficient vehicles can save you significant amounts of money on petrol. For instance, some of the most efficient commercial vans on the market include the models like the Peugeot Boxer, and the Citroen Relay. Operating a vehicle is expensive enough in Singapore, so you want to be able to keep your operating costs as low as possible.
Here are some examples of fuel-efficient delivery vans:
|19.3km per litre
|16.2km per gallon
|Cost of petrol
|$2 per litre (Shell FuelSave 95 as of article publication)
|Sample distance travelled
As you can see from the table above, even between two fuel-efficient vans, you’ll save almost 20% if you operate the Peugeot over the Citroen! Imagine how much more you’ll save if you compared the Peugeot with even less fuel-efficient vehicles. If you operate commercial vehicles, switching to fuel-efficient models should be priority when evaluating cost cutting ideas for businesses.
#20. Build partnerships with business associations to access perks
Identify the relevant trade associations in Singapore for your industry. If you’re a retailer, sign up with the Singapore Retail Association. If you’re an F&B establishment, connect with the Restaurant Association of Singapore. Manufacturers can look to the Singapore Manufacturing Federation. Members of these associations often get access to group discounts from service providers, alongside networking opportunities with other business leaders. These relationships can come in handy when building partnerships to grow your business.
#21. Compare and negotiate with suppliers
You should treat all supply orders as negotiable. Don’t just take the first price you’re quoted – make sure to shop around and compare quotes. If you find a better quote, you can take that quote and use it to convince your preferred supplier (if you have one) to lower their pricing.
#22. Shop around for mobile phone and internet plans
In recent years, new mobile phone providers like Circles, Giga, and MyRepublic have disrupted the local market, which used to be dominated by a few select players like Singtel and Starhub. These new entrants offer very affordable mobile plans. If you provide employees with company phone lines, do make sure to shop around to get the most affordable plan that suits your needs. View this useful phone plan comparison guide from Seedly.
#23. Shop around for electricity plans
Whether you use an office, retail space, manufacturing space, or other kinds of commercial property, you should shop around to find the best electricity rates. You can use Open Electricity to compare different providers to find the lowest rates.
#24. Separate personal finances from business finances
Some business owners may mix their personal finances with their business finances. They may use their business to pay for personal expenses like food, housing or travel. There are serious legal implications for this, but if we examine it strictly from a cost perspective this is clearly not an effective way to utilise cash from the business. Make sure to keep the company’s money separate from your own spending.
#25. Buy OEM (Original Equipment Manufacturer) products
You can save a ton of money by buying OEM equipment. For instance, OEM versions of Windows can be up to 50% cheaper. OEM computers can be up to 30-40% cheaper than branded ones. Some people think OEM equipment are counterfeit goods, which is a complete myth. OEM equipment is perfectly legal – they’re just sold direct to the consumer from the manufacturer (hence the name). OEM is in no way inferior to the branded versions – you save money because you’re not paying for the brand.
#26. Buy computers from non-name brand suppliers
For laptops, it’s much cheaper to get them from companies like Aftershock. These computers are assembled using OEM parts, and are cheaper than competing laptops from brands like Dell or HP. These computers come with warranties, so you can bring them back to the shop for repairs if need be. They’re not any less reliable than branded PCs (they both use the same components), but you save money because you’re not paying for the brand.
If you’re using computer desktops, it’s much cheaper to get them assembled for you using OEM parts at Sim Lim Square. Prices of such computers are much lower than buying similar computers from household brands like Dell.
#27. Review all subscription services and cancel unnecessary ones
Sometimes businesses can lose track of all the subscription services they use. Whether it’s marketing analytics, accounting, business productivity software, there’s a whole plethora of services that can sometimes get piled up. Sometimes, different departments will sign up for duplicate services. Other times, services that were previously needed but are no longer used are still being subscribed to. Take stock of all your current subscriptions, and throw out those that aren’t absolutely essential.
#28. Hire interns or trainees to assist with simple tasks
It’s useful to identify which kinds of low-level tasks your employee are performing. Do you really need experienced, full-time employees to be working on such tasks? If the work is relatively basic and repetitive, consider hiring interns or trainees to take over these kinds of work. This will free up your employees to focus on higher-value activities to grow the company. The SGUnited jobs scheme is very useful for hiring trainees, witt the government subsidizing 80% of wage costs for the next year.
#29. Barter with other businesses
Instead of paying for services with cash, why not offer to exchange your products or services with another business? In the US and UK, such barter associations are small but thriving scenes for SME owners looking to fuel business growth without spending too much money. Although barter associations are harder to find in Singapore, that shouldn’t stop you from reaching out to businesses that have goods or services that could be useful to you, and offering to exchange your own offerings for theirs. For instance, if you run a mechanics workshop and purchase supplies from an automobile wholesaler, you could offer to provide free/discounted services in exchange for inventory.
#30. Optimise staff scheduling for peak and non-peak hours
If you run a retail, F&B or personal service business, you should optimise the number of staff at different hours. Don’t put up the same staff strength through the entire day, because certain hours will be less busy – the “dead hours” of 3-5PM versus lunch hour and dinner time. Look at how customers patronize your business – are many more of them coming in on weekends than weekdays? Plan accordingly to deliver the right service standards at such times, and trim headcount accordingly during less busy time to save on labour costs, which are expensive in Singapore.
#31. Ensure that you’re properly insured to avoid expensive accident costs or legal liabilities
This is one area that business owners sometimes skimp on. Instead of being properly insured, business owners choose to forego insurance altogether. They see it as a unnecessary overhead, and think they won’t ever find themselves in a situation where they have to file a claim.
“A client suing me for errors in my advice to them? Who would have the time and money to sue me?”
“Employees stealing money from the cash register? Maybe at another business, but not mine.”
“A fire breaking out in my business premises? I’ve seen fires happen elsewhere, but it won’t happen here.”
The above are common rationales that SME owners often present to themselves as reasons for not carrying proper business insurance. Of course, an insurance practitioner who regularly deals with claims will tell you that such attitudes are extremely dangerous, and extraordinarily costly! If you get hit with a lawsuit and you’re uninsured, you could become bankrupt overnight. A fire could easily gut your entire business, sending you into financial devastation. Always make sure that you have adequate insurance protection, and you’ll actually save money in the long run.
#32. Use online insurance providers
Insurance is one of the top overhead expenses that you definitely want to trim. If you’ve been using a traditional brick-and-mortar agent, you’re probably paying more than you need to for insurance. There’s over 30 different insurance companies in Singapore – are you sure that you’re getting the absolute cheapest premiums possible? You could save significant amounts of money by using an online broker that can easily help you compare and save on insurance. Such online brokers can reduce the amount you have to spend on liability insurance, property insurance, shipping insurance, and more.
Your best bet is to use an online insurance broker like Provide. Our digital operating model creates lower overheads, so we pass every dollars saved back to you. Save up to 25% on your premiums today!
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