How Can Businesses Reduce Their Operating Expenses?

How Can Businesses Reduce Their Operating Expenses?

Operating expenses are the regular and recurring expenses that a company incurs in the courses of its businesses operations. This involves salaries, rent, utilities, office supplies and marketing expenses.

Operating expenses are necessary to keep the businesses running. They are separate from other expenses such as capex which are investments in assets like buildings, equipment, and property. Operating expenses are generally considered as a key component of a company’s income statement or profit and loss statement. They are deducted from the company’s revenues to determine its net income.

Common examples of operating expenses are employee salaries, office rent, utility bills, insurance premiums, travel expenses, office supplies and marketing costs. Generally these expenses are incurred on a monthly or quarterly basis and are essential to keep the business running on a daily basis.

Different Ways To Reduce Operating Expenses

It is critical for a company to reduce its operating expenses in order to spike its profitability and there are many ways to reduce the operating expenses without negatively impacting the quality of a company’s products or services. Some effective methods to consider in this regard are as follows:

Revision and Negotiation of Contracts:

Periodic review of all contracts with suppliers, vendors and service providers is important to acknowledge if there are any cost-saving opportunities. Settling better rates and terms with above mentioned parties can help to reduce expenses.

If you have been working with the same suppliers for a long time then it’s time to look around and compare the prices of similar Businesses services and products with different suppliers. If you can find a good deal then switching to it will be a wise decision.

Deploy Energy Saving Measures:

Energy costs are among the significant expenses for businesses but there are many smart ways to reduce your energy costs. This can include installing energy saving light bulbs, turning off electronics and appliances when not in use, getting cost effective office equipment, shifting to solar systems and upgrading to more efficient heating and cooling systems.

Try to Outsource Non-Core tasks:

Outsourcing tasks is a common practice of the companies of all sizes. Certain companies regularly outsource their non-core tasks to reduce the manpower and focus on other aspects of their business. Commonly outsourced tasks are human resources, auditing, supply chain management, logistics and payrolls.

Try Business Automation:

Automation of tasks that are part of a business’s daily activities can significantly reduce operating costs. Automation provides more efficiency and accuracy by reducing delays and errors as these systems are programmed to perform the tasks with highest accuracy which eliminates the need of manual correction and rework.

It is also helpful in reducing labor cost as these systems can work 24/7 without requiring any breaks, vacations or sick days. Some of the business processes that can be easily automated are accounting, advertising, legal and human resource.

Allow your Employees to Work Remotely:

Rent or leasing fees are among the biggest expenses for a businesses and other add on costs associated with it are cleaning and maintenance. If you can allow all of your employees to work remotely then you will save thousands of dollars per year and if it’s not possible for the entire team then consider renting a smaller office space.

A smaller office space will require less maintenance and eventually the rent will also be lower than a giant office. Additionally, your business will save on utility costs also.


Operating expense management is a must for a successful business and by implementing the cost effective measures listed above, businesses can reduce their operating expenses and improve their bottom line. However, it’s important to carefully consider which strategies will work for your business based on its circumstances. You can also visit here Now