Increase Profitability

10 Strategies to reduce costs in the company and increase profitability

We know that as a manager or president of a company you always have one thing in mind: reducing costs, along with the search for new strategies to increase profitability.

But is it really possible to achieve this without laying off employees, lowering the quality of products and services, or negatively impacting the structure of the company?  Yes. But it is necessary to analyze in depth both the activity and the operation of the company’s processes, in order to make future decisions that allow you to reduce costs and increase profitable growth. That is why today we share some strategies that can help you achieve this goal.

how to reduce costs in the company

How to reduce expenses in a company and increase productivity?
Do you know what the term “process reengineering” or Business Process Reengineering (BPR, for its acronym in English) means? If you have no idea what we are talking about, we will explain it to you below:

“Reengineering is the fundamental overhaul and radical redesign of processes to achieve dramatic improvements in contemporary and critical measures of performance, such as cost, quality, service, and speed.”

This evaluation makes it possible to detect failures, inefficient processes, unnecessary tasks, and determine the real costs at each stage of the production process. So if you ask yourself how to reduce expenses in a company? Based on this diagnosis, you can start working on adjustments.

Within each organization, there are fundamental areas, in which you can start the implementation of this strategy to reduce costs.

Human Capital Department
Considering that employees are the most important resources since their professional capacities guarantee the success of the processes, it is necessary to manage Human Capital efficiently. We know that this is not an easy task; therefore we recommend you consider:

1. The outsourcing of payroll management. In Mexico there are firms specialized in the outsourcing of payroll, which is in charge of complex calculations; keep benefits and payments up to date; carry out the employer proceedings; Payroll (payroll maquila); specialized recruitment; among other services. When you delegate these tasks, you can reduce financial costs, as well as the administrative burden that comes with maintaining an internal department.

2. Team incentives. When employees are motivated there is a positive impact on productivity. It is not just about giving them more money, because a company that cares about the well-being of its staff and offers opportunities for professional development through constant learning, is well valued. Being considered an ideal place to work, employees will be focused on their tasks, without thinking about looking for new opportunities. With this, you get a reduction in the costs caused by staff turnover.

3. Reduce occupational risks. Each company has a loss ratio according to the activity it carries out. With the Annual Statement of Work Risks, you can determine the risk possibilities to which your collaborators are exposed.

Detecting risky areas improves the maintenance of facilities and avoids factors that endanger the equipment. This reduces the cases of absenteeism due to illness or accidents. In addition, by lowering the accident rate, the work risk premium before the Mexican Institute of Social Security (IMSS) is reduced.

Administration Department
The administrative area can also be outsourced to reduce costs and increase productivity. Of course, you should be aware that this team also develops strategies to reduce costs in the company, such as the ones that we are going to present to you now:

4. Comply with tax obligations and avoid fines. As a company, you have some procedures to carry out before the authorities, such as payment of benefits, payment of taxes, annual reports of profits, among others. Failure to do so can result in penalties that would have a strong impact on the company’s finances.

We can recommend that you create a checklist of your Company’s Compliance with Tax Obligations so that you do not miss any.

reduce costs in the company
5. Budget and inventory monitoring. Keeping constant monitoring of the production process allows better planning of the budget. In addition, it will be possible to identify unnecessary expenses or new trends to better position your services.

One of the advantages of this inspection is not to accumulate inventory or to have a low turnover rate. When you manage to efficiently solve this situation, you can reduce costs and increase productivity.

6. Restructure expenses
marketing. Using “guerrilla marketing”, social networks, or some creative alternatives to promote your company, is reflected in a reduction in costs compared to other traditional media.

It may interest you: Financial Social Responsibility

operations department
While you can handle some issues with external teams (raw material suppliers, for example), the operations department is the heart of your company. For this reason, it is key that it be profitable and sustainable, so it is one of the areas that we recommend you review when you want to reduce costs. These are some of the general recommendations:

7. Save on services and materials. This strategic task ranges from lowering electricity consumption (with the usual tips to disconnect equipment, take advantage of natural light, among others) to avoid unnecessary printing on paper.

Taking these measures, with the collaboration of your employees, is a good tool to reduce costs in a company; while being responsible for the environment.

8. Process automation. One of the advantages of technology is that it allows you to reduce costs and increase the productivity of your company. For example, you can use a CRM for the sales area, or a chatbot for customer service.
You can also integrate certain equipment into your production line that increases the efficiency of the work team.

9. Cloud technology. You no longer have to spend a large amount of money on computer equipment. Thanks to technological development, you can store your information in the cloud, manage the company’s servers, implement virtualization and other functionalities, while reducing operating costs.

10. Alternative contracts. Figures such as the Home Office or freelancers have gained a presence in the professional field. This is because younger employees are not comfortable with traditional hours. On the other hand, some specific tasks can be solved without the need for a plant worker dedicated exclusively to them.

In this way, you not only modernize the structure of the company, making it more dynamic and flexible, but it is also positive for the financial health of the company, by reducing operating expenses.

When aiming to reduce costs in a company, it is always necessary to evaluate its processes and make adjustments that do not necessarily have to be drastic. In fact, you can start with the implementation of small changes that impact the structure.

From there, scale the scope of the changes until the development of a long-term proposal that consolidates a new business vision is achieved. The market is constantly evolving, so we need to take regular action to avoid being left behind.