5 Strategies for Reducing Overhead Expenses

Business overhead expenses are the costs or expenses required to run the business rather than the cost of production or revenue. These costs are used to budget and determine product prices to cover expenses and profit. The three types of overhead expenses are fixed, variable, and semi–variable costs. A few examples of fixed costs are rent, phone bills, and interest on mortgage payments, while variable costs can include gas bills, electricity, and vehicle maintenance. Examples of semi-variable costs can consist of staff bonuses and janitorial services. Regardless of the type of cost, your business must pay overhead expenses. Whether your business is making a profit or incurring loss, these expenses cannot be avoided.

Overhead expenses are generally paid monthly or annually. For growing businesses, it is crucial to spend money on the right expenses by planning. Similarly, for overhead expenses, planning your expenditure is more important as money drains easily on these expenses. To reduce and save overhead expenses it is good to find strategies and implement them in your business. A few strategies to reduce your overhead expenses are:

• Clearly and thoroughly review your overhead expenses. It is important to identify your overhead costs to determine your necessary and unnecessary expenses. Once you recognize which overhead expenses are unnecessary, you can begin to eliminate them. This is an efficient way to save your overhead expenses and redirect resources to necessary processes or goods.
• Find software and accounting tools. Investing in software or an accounting tool is a one–time investment that is beneficial for your organization in many different ways. Though it may seem like a large initial expense, it is a frugal expense that will save you money in the future. At the time of purchase, it can seem like you will be overspending, but it may also mean that you will no longer need to pay an accountant. Similarly, utilizing these tools will mean your results will be accurate and calculated quickly. Many accounting tools are user-friendly and easily accessible, making this option beneficial and cost-saving.
• Only keep the required number of workers on your team. Employee wages are one of the most significant overhead expenses in a business. Keeping an unnecessary number of workers in the business increases the costs. That is why you must develop your business plan to identify the number of employees needed in the business and budget accordingly before recruitment. It is also important to measure the productivity of your workers to ensure they use their skills efficiently and allow you to train workers to multitask.

• Go green and paperless. Paper and ink seem like small expenses in a business, but they are used so frequently that their costs steadily increase. Not using paper and accompanying ink is going to save money on your overhead costs, so transitioning and implementing paperless processes will become an efficient and cost–saving decision. Likewise, research and use other eco-friendly alternatives such as energy-saving electronics and refillable ink cartridges.
• Renting. Renting or leasing your equipment will allow you to easily upgrade to the latest technology since you will not be the owner or responsible for off-loading the equipment before purchasing an upgraded version. Likewise, you will not be liable for maintenance, repair expenses, or upfront payments.

To operate and maintain a business, overhead expenditures are necessary. However, most business funds are drained on overhead expenses, especially those that are not necessary. It is essential to monitor overheads to avoid overspending, so a business should discover and implement strategies to minimize the overhead expenses and effectively use funds in the business.