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How to minimize expenses for small business in a down economy

By Edited Nov 13, 2013 1 4

Reducing business debt is important during an economic crisis like the one we are facing today. A nose dive in the economy is causing companies to cut back in different areas in order to reduce debt. Some companies are cutting back in other areas or simply eliminating them which will help to free up cash flow to help decrease some of their debts. Being creative on how you reduce company debt can not only save the organization, but prevent employees from losing jobs.


Things You Will Need


Step 1

Cutting expenses
Cut back on the expenditures your organization reimburses employees for. Some companies pay for parking, cellular phones, internet services or tuition. These expenses can add up, depending on how much the company pays out monthly.


Step 2

Change the way employees travel. Some employees would rather fly than drive to a city that may be four hours away; most employees travel this way to get home quicker. Consider using a rental car for company business trips in cities that aren't too far away. Making this change to employee travel could help to reduce the travel budget


Step 3

Cut back on employee overtime. Most employees work an hour or two over each day which adds up to an extra day's pay when you factor in the time and a half rate. To compensate them for the overtime they may have to work give them an extra day off during the week or allow them to take a longer lunch break.


Step 4

Hold back salary increases. Most companies give out cost of living raises every year which can be anywhere from three to five percent of the employee's salary. Not allowing raises for one or two years can increase savings for the company. You can also give employees a reduction in pay. Reducing employees pay by ten percent may not seem like a lot but depending on the amount of employees you have can total to be a great amount. Since CEO's or upper management are some of the highest paid employees start at the top.


Step 5

Sell some of the company's assets that are not being used. Some companies have real estate or equipment that can be sold. Selling these items to other organizations that may need them is another good way to generate money to reduce debt.


Step 6

Reduce the portion of benefits the company pays to employees. For example, if your company matches 4O1 (k) dollar for dollar, change your match to a percentage or simply stop matching the payment altogether.


These changes can be temporary until the economy turns around. Ask your employees to get creative with submitting ideas on ways to cut back in other areas. Making the change as a group will help employees be more accepting to changes that are taking place. This will also help employees to be prepared for cutbacks that may take place.


Tips & Warnings

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Comments

Sep 28, 2010 11:58pm
Sookie
trimming here and there can add up too. Great article!
Sep 29, 2010 11:05pm
JonMykal1
thanks for the comment.
Sep 30, 2010 6:39am
askformore
Great article with several good tips about controlling expenses. I agree that the employees should be involved in the process, and they should be informed about what the 'expense level' target is.
Oct 1, 2010 10:06pm
JonMykal1
Thanks
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