Overspending: How to Minimize CostsLeave a Comment
Even during the best of times, reducing costs and increasing revenue are the best ways to keep your business healthy.
Right now, identifying and reducing areas of excess spending is a critical priority. Here are a few areas that we frequently see overspending:
Internet and Telecommunications
Even before the increases in video-conferencing, communication and accessibility were critical to just about every business.
However, in our experience, many businesses are overspending on Internet and Telecommunications. We frequently see contracts that have not been reviewed for many years contain hidden fees and commit organizations to far more services than they truly need. This can result in hundreds, or even thousands of dollars per month in unnecessary spending.
Data Storage and Management
Most modern businesses need some way to securely store and manage data, whether it is customer information or industry developments. We have worked with many clients to migrate to and get the most from “Cloud” services such as Amazon’s AWS and Microsoft’s Azure.
Recently, we’ve seen that many of our newer clients are overspending and/or overpaying for these services. They have often signed up for more services or features than they actually use or need, they have not reviewed usage and utilization in a long time, and they have not made sure they are on the right pricing plan. This means that they are paying for things they never use, or paying too much for basic services.
There are thousands of companies with millions of software products targeted at business owners. These software products can help your business perform new functions, operate more efficiently, and increase profitability.
But each new software package you add to your suite of business tools is going to cost you a monthly subscription fee. If you are not careful, you will end up with far too many products that aren’t helping your business, costing you thousands of dollars per month.
Marketing and Advertising
Marketing and advertising can be expensive, but they are also important investments that shouldn’t be cut without analysis and forethought.
Your goal should be spending money on marketing and advertising in the most efficient way, resulting in the least possible amount of waste. To do this, you need a solid high-level marketing strategy in place, a reliable marketing and advertising partner, and the ability to focus your spending and attention on the tactics most likely to pay off.
Even before the pandemic, too many businesses were paying large amounts of money for a traditional office space that they weren’t making the most use of, and more money on top for additional products and services to keep the office functional.
The increase in working-from-home has many companies asking themselves, “Do we really need all this office space? Can people work from home instead? Can we downsize to a smaller or less expensive office?” If the answer to any of these questions is yes, the potential savings could be significant.
Why Do Businesses Overspend?
If you want to correct your overspending in these categories, you need to narrow down the reason for your overspending. These are the most common culprits:
Lack of initial planning
Some businesses either don’t take the time to plan a budget or don’t have an idea of what each category should be costing them, so they’re likely to agree to any cost quoted by a vendor.
Bad vendor selection
Most vendors are scrupulous, offering fair prices and good services, but others are questionable. Choosing an unreliable, overly expensive, or outright manipulative vendor can hurt you.
Failing to negotiate
Almost everything in business is negotiable, even contracts for what seem like standard service packages. Spend more time negotiating with your vendors and other business partners to get a better deal.
No analytics or auditing
Many businesses continue to overspend because they have no system to analyze expenditures that allows them to identify or address instances of overspending.
How we can help
We have a proven methodology to help clients identify overspending and deliver efficiency savings and could help you in your planning, vendor selection, vendor negotiations, and ongoing expense analytics. If this might be of interest to you, please give us a call!
– Mark Jacobs, Client Service & Delivery