Cutting Expenses to Increase Profits

As small business owners we are always looking for ways to increase profits. Many business owners look to increase sales and ignore cutting expenses. Cutting expenses however can generate a higher percentage return on profits than increasing income and may be a lot easier to find.
For an example, if you decrease expenses of office supplies by $100 per month you realize $100 in increased profits each month. To get the same return with an increase in sales by selling a $50 item with a profit margin of 20%, you need to increase revenue by $500.

Depending on the amount of revenue and expenses your company has, finding ways to decrease your expenses might be an easier process.

The first step to look at lowering costs is to review a report of your monthly expenses by category. Look at the last two years if they are available. You should look for any expense categories that increase with no justification such as increased sales. We found when we changed responsibilities of staff for who was in charge of office supplies one year that our office supply expense jumped 50% in one quarter. The only reason: a new person purchasing office supplies.

Source: David Gass, President & CEO, Business Credit Services Inc.