How To Identify And Eliminate Waste In Your Budget
It’s never been more important for small and medium-sized business to know how every dollar is spent. Identifying and plugging those small drips and big leaks help every business stay afloat when competition is tight. But what are the most efficient strategies to target waste in a complex business budget? Let’s explore how to get started:
1. Understand the ROI for Each Expenditure
Return on Investment—ROI—isn’t just for the big stuff like marketing and technology. It’s time to rethink the return on investment for every expense your business incurs.
For this step, it often helps to think of your business as a brand new enterprise. If you were launching your business today, what would you change? What long-term commitments or contracts are working against you and is there room to renegotiate or reinvent a few things and save some dollars in the process? What would you lease instead of buy, buy instead of lease?
2. Get Granular
Avoid death by a thousand cuts.
Take a look at all levels of your business in your effort to reduce waste. Can you refine your marketing strategies to reach a more targeted audience? Are you communicating with your customers too much and not optimizing each message? How can you deliver your product more efficiently? Are you paying too much for office space or paying for space you don’t maximize? This soup-to-nuts approach can help reduce incremental expenses and catch operational inefficiencies that add up to big dollars over time.
3. Look for Repetition, Redundancies and Communication Gaps
Examine the entire lifecycle of your operations to see if there redundancies or unnecessary repetition and replication of duties.
Often, the view from ten thousand feet can reveal clear opportunities to streamline workflow, better divide tasks, eliminate unproductive steps and ultimately save money. Pay close attention to what consumes the largest amount of time in your business, like sourcing products, manufacturing, sales, fulfillment, or customer service. Take a critical look at each phase independently to see what can be done better and then examine how each phase works together. Is customer service missing opportunities to communicate upsell opportunities to the sales team? Are delays in fulfillment creating double work for customer service?
4. Tap Your Resources
Often, it’s the people closest to the day-to-day operation of a business that can be your best waste-reducing advocates.
Regardless of the size of your business, seek input from staff at all levels as you work to refine your budget and reduce unnecessary expenses. Reward employees who have the best suggestions for streamlining processes.
5. Formalize Efficiency Reviews
Businesses are constantly changing and evolving.
A review of how things are done and how things can be done better, smarter, and faster is a continuous process. Consider scheduling a periodic efficiency audit or creating a permanent team that is tasked with identifying and reducing waste on an ongoing basis. But watch out that your efficiency committee doesn’t become a source of inefficiency itself. Look for concrete results and empower committee members to review and vet each new opportunity to waste and bring only the best options to you for approval.
Today’s smartest companies realize that waste isn’t just a drag on budgets—it can mean the difference between surviving and thriving. A holistic, process-focused, employee-driven review of inefficiencies and budgetary waste can free up capital for new ventures, help reward loyal employees, and speed new ideas to market. Companies that have a close eye on reducing waste are ultimately leaner and able to respond to the vagaries of the market—scaling up or scaling back to meet shifts in demand or respond to new economic challenges. Identifying and reducing waste becomes an opportunity for growth and can be the competitive advantage a company needs to stay ahead of the curve.