Most new entrepreneurs are very conscious of every cent they spend. However, reviewing overhead cost is often overlooked when the business is already up and running. The truth is, it is nice to invest some time on planning how to reduce your cost and is beneficial in both short and long run of the business.
What is overhead cost? First, you need to know what overhead cost is. These costs are actually the expenses that are related to the day-to-day running of a business. Reducing overhead costs is important in a business success.
Overhead costs do not include expenses arising from the production of goods or services. They are independent of revenue and must be paid whether the business is in a profit or loss position. They can include fixed monthly or annual costs such as building rentals, insurance, or salaries; or expenses that vary from month to month due to the level of business activity such as sales promotions or repairs.
Cutting overhead cost is so helpful if the business is performing poorly – your business can reduce losses and increase your profitability. However, there are kinds of overhead costs such as inventory, raw materials and are difficult to cut down.
Meanwhile, there are also some overhead costs that are easier to control. Utilities, for example, can be controlled. Expenses including water, sewer, gas, internet services, phone and electricity can be reduced. With these expenses, there may be potential cost savings from switching to lower-cost plans.
If your business relies on vehicles or specialised equipment, the overhead costs of maintenance and repair can be substantial. One of the best ways to cut this cost is by switching to more fuel-efficient models such as diesels or hybrids.
To learn more on how you can take control of your overheads as well as cash flow, you should read this blog post: https://www.flyingsolo.com.au/marketing/anz-take-control-of-overheads-and-cashflow