How To Save Money In Your Company

Money matters especially in fast-paced and capital-intensive industries. Without ample funds, the firm is stuck on money that just revolves back to the operations, earning very minimal. No expansion could be done if it barely earns for itself. Unfortunately, in an area where there are competitors, not all are fortunate enough to call themselves successful as a business that spends too much and gains too little. In this case, we must learn how to save money that could be used in improving our services. Here are some tips on how to save money in your company:

1. Check with Finance. You can’t just cut off whatever supply, manpower, or material in the company just to preserve funds. First things first. You have to understand where you are incurring the greatest expenses in the company. Pinpointing what makes you spend money without gaining much return would allow you to decide properly.

Not all pricey processes should be cut off, though. Things like equipment maintenance, and rent could be costly, but they are indispensable part of your operations. High-priced computer equipment used only for office software, however, is one example of unnecessary expense. Settle for cheap but still as usable equipment.

2. Do it in-house. Recently, after one of our suppliers closed down shop, we started looking for others who could fill in our orders. After failing to get one that could match our previous supplier’s price and efficiency, we started computing how much it would cost us if we do it in-house and acquire our own equipment. And behold, we found out that even with our previous supplier, we could have saved so much more if we just integrated the outsourced process in our operations.

Backwards integration is a process where instead of contracting other companies for your supplies, you do it yourself. An example of this is a slaughter house having its own poultry farm that generates its own supply of chicken for the slaughter house, instead of asking other poultry farmers to sell to them. However, not all can save through backwards integration as this could cost you additional overhead expense. See if with the purchase of new equipment, facilities, and people for the integration, you would still be able to save money versus outsource. If not, then just look for suppliers willing to sell cheaper.

3. Stick with Just-in-Time inventory. You lose money if you buy too many items that you won’t be using for another few months. Learn about “Just-in-Time” inventory system. Just-in-Time inventory system is a process where you just buy items that you would need and reorder “just in time,” based on lead time and supply levels. To do this, you must know how many days it would take for your supplier to deliver and how many you consume per period. A basic example is ordering today from a supplier that delivers within three days, while remaining inventory can accommodate three to four operating days. The order then arrives just in time. By doing this, you spend less than buying in bulk, prevent spoilage for items that expire (especially in the food service industry), have less inventory to take care of, and save more money that you can use for other more urgent expenses.

4. Ask for perks and discounts. A lot of suppliers offer bulk sales discount if you would be ordering a certain amount and/or contracting with the supplier exclusively for a long period of time. Bulk-sale discounts are common, even if they do not explicitly tell you so. Learn how to negotiate. If you know that they are reliable and you are confident enough to engage with their services continuously, tell them and ask for discounts. Corporate accounts are bread and butter for many companies because of the volume purchases and so they are more likely to give concessions.

You could also try offering ex-deals with your suppliers — that is, getting their items in exchange of yours. An example of this is a tech company offering free or discounted price for their product to a blogger. For the tech company, they get advertised for the cost of one unit of product and for the blogger, he/she gets a new gadget. It’s a win-win agreement for both parties.

5. Connect. Sometimes the cheapest suppliers you can get are those that are within your peers. Check if you are friends with anyone who can provide the supplies you need for your business. Who knows, you might just find the cheapest (with exclusive discount for your company) and most reliable supplier through them.

There are countless ways you could find to reduce expenses and the effort must never stop if you are to keep your financial situation healthy. Note that a peso saved is not just a peso earned but it is also a peso earned without additional investment.

*Originally published by the Manila Bulletin, C-6, Sunday, October 23, 2016. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.