Businesses aim to reduce indirect costs to maintain high net profits. This can be achieved by identifying which costs can be reduced without affecting the overall operation, such as utilities, shipping, and office space. Simple changes like turning off lights and combining locations can help cut costs. Renting unused space can also generate revenue to offset maintenance costs.
Effectively managing indirect costs is a task that businesses of all sizes and types undertake as a means of keeping net profits as high as possible. Costs of this type can cover a wide range of expenses that are important to the business even if they are not directly involved in the production effort. With indirect costs, the goal is to identify which can be reasonably reduced without creating difficulties for the overall operation. This can often be verified by reviewing each indirect cost, determining its value to the business, then taking steps to minimize usage.
One of the most common indirect costs associated with business operations is the use of utilities such as electricity, water or natural gas. In order to reduce the effective monthly expense associated with these utilities, it is important to understand how these resources are used each month. Often, making simple changes like turning off the lights and air conditioning in unused areas, fixing leaking water pipes, or shutting off the gas in areas that don’t require heat, will decrease the amount of your monthly bills, effectively freeing up more income stream for other purposes.
For companies that rent office space or other facilities as part of their business operation, reducing indirect costs can involve combining two locations into one or moving a single operation to a smaller, more cost-effective building. For example, a company that currently operates a citywide sales office might find that cleaning some unused offices in the main facility for the sales team would eliminate the lease on that office altogether, while still providing the team with of sales an operating base.
Shipping costs are another example of overhead costs that can be reduced by exploring different shipping options. Some businesses will find that volume discounts can be secured by a single shipper rather than using the services of multiple shippers at standard rates. In some cases, this can cut overhead shipping costs in half, all in exchange for concentrating usage with one carrier and agreeing to do so for at least a couple of years.
Don’t overlook the opportunity to cut indirect costs by renting unused space at company headquarters. Leasing office space to small businesses creates the ability to take areas of the facility that are not currently involved in manufacturing or fill some other useful purpose and turn them into sources of revenue generation. That money can be used to offset indirect costs associated with maintaining and upkeep of the facility, an arrangement that helps everyone involved.
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