How to Reduce Expenses in a Company

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1 Lowering Financial Expenditures

2 Using Efficient Time Strategies

3 Marketing More Effectively

4 Cutting Production Costs

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Article Summary

Co-authored by Gina D'Amore and Amy Bobinger, BA

Last Updated: August 18, 2025 References

Whether you run a family-owned diner or a startup tech company, if you are a business owner you will eventually find yourself needing to reduce company expenses. Even if business is going well, saving money can help you plan for an expansion or hire new talent.

Steps

Method 1

Method 1 of 4:

Lowering Financial Expenditures

1. 
   1
   Look over your expense report and cut unnecessary expenses. The first thing you should look for are charges for anything that you don’t use. For instance, you might have signed up for a free trial of a software service (SaaS) that you forgot to cancel, and now they’re billing your company every month. Expenses like this are the easiest thing to cut to add a little cash back in to your budget.
2. 
   2
   Offer incentives to staff who help you cut expenses. Make financial responsibility a core value in your company by giving your staff incentives for finding ways to cut costs. If you give your employee a one-time $200 bonus for saving you $1200 per quarter, you’ll still be saving money in the long run.
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3. 
   3
   Be willing to fire people who don’t perform. Every business owner dreads having to make this decision, but if you’ve spent the money to train and develop an employee who just isn’t performing, it might be time to make the cut. Be honest with yourself about whether or not your employees bring value to your company. If they don’t, make room for someone who will.
4. 
   4
   Negotiate every expense. Most vendors, service providers, insurance companies, and even credit card companies are willing to negotiate if you’re a big enough client. Negotiate when you first sign on with these companies, then revisit your rates every few years. If a company isn’t willing to work with you, consider moving to one that is.
5. 
   5
   Consider a local or regional bank if you are a small business. Nationwide bank chains have little incentive to offer competitive rates to small businesses. Compare the rates of several smaller banks that operate just in your region and ask them what kind of incentives they can offer.
6. 
   6
   Make bulk purchases whenever possible. You might already be purchasing your office supplies in bulk, but you may not have considered that you can buy in bulk in other ways, too. Try contacting your service providers to see if you can save by paying for services annually instead of month-by-month. This may apply to software subscriptions, too.
7. 
   7
   Outsource your HR department to save money. You can save big money every year by outsourcing your HR department to a PEO, or professional employer organization. These companies handle all of your payroll needs, as well as employee benefits, workers’ compensation claims, risk management, and more.
8. 
   8
   Outsource non-essential tasks to freelancers. Hire freelancers for services that you don’t need done in the office, like website development or graphic design. Find freelancers by posting ads on websites like Upwork or Fiverr. Freelancers have to bid against each other on these sites, so they usually offer competitive rates.
9. 
   9
   Relocate your office to a more affordable area. It can be tempting to house your business in the nicest part of town, but if you don’t rely on walk-in customers, you could be paying way too much for rent. Try talking to a realtor to see if there are affordable options across town that will suit your business needs.
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Method 2

Method 2 of 4:

Using Efficient Time Strategies

1. 
   1
   Set expectations for when tasks should be completed. Set goals for how quickly employees should be able to complete their tasks, and offer incentives for meeting or exceeding those goals. This will help your employees understand what is expected of them, and it should encourage them to stay on task.
2. 
   2
   Measure your employee’s activity and productivity. Install software that will keep track of how much time your employees spend using apps and websites that aren't related to work. Monitor this usage to see if there are any areas where efficiency can be improved.

   • Be transparent about the fact that you’re keeping track of what your employees do on their computers. This will likely boost their productivity and will promote an atmosphere of honesty in your workplace.
3. 
   3
   Look for processes you can automate. Save money by automating whatever you can. For instance, if you’re still processing credit card payments by hand, you can save payroll hours by switching to a software like Quickbooks that will do it for you.

   • You can save employees’ time and office space by automating onboarding paperwork. Have new clients fill out paperwork online instead of in the office.
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Method 3

Method 3 of 4:

Marketing More Effectively

1. 
   1
   Implement a referral program. Give your existing customers an incentive to refer others to your business. Offer a small reward, like a $10 discount, to both the original customer and the referred party when you make a new sale. This will help encourage customer loyalty as well as word-of-mouth advertising.
2. 
   2
   Shift your marketing focus to the digital realm. Traditional marketing methods, like television and radio ads, can still be effective, but if you’re trying to cut costs, consider focusing on digital advertising. Social media campaigns and pay-per-click ads can offer a high return for a relatively small investment.
3. 
   3
   Focus your ad campaigns on what makes your company different. If there’s something about your company that you’re especially proud of, even if it’s not directly related to your product or service, consider making that the focus of a marketing campaign. For instance, if you give all of your employees stock in your company, let the public know about that. It sends a message that you care for your workers, and that can build consumer confidence in your brand.
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Method 4

Method 4 of 4:

Cutting Production Costs

1. 
   1
   Monitor your inventory closely. It can seem like a good idea to keep excess inventory on hand, but in reality this can tie up your cash flow and cost you extra money in storage. You should continuously monitor your inventory to make sure you’re only ordering what you need.

   • It might seem like a good idea to order 2 years’ worth of packaging for your product, but if new regulations cause you to change the wording on your label in 6 months, you’ll be stuck with pallets of material you can’t use.
2. 
   2
   Sell or write off old inventory. If you have inventory left over from a promotion or a line which didn’t sell well, consider selling it or writing it off on your taxes. If you haven’t done anything with it in over a year, you’re probably just wasting valuable storage space.
3. 
   3
   Always get multiple bids before you make a purchasing decision. No matter what service or product you’re purchasing, get bids from 3-5 companies before you make a decision. Be sure to ask about all of the details of the purchase when you’re getting a bid. You might find 2 manufacturers who offer a product in the same price range, for instance, but one may offer free shipping when you sign a 2-year contract.
4. 
   4
   Lease your unused production space. Co-working spaces are on the rise in recent years thanks to their increased efficiency. If you have unused office or warehouse space in your production area, consider leasing it to another individual or company for added revenue.
5. 
   5
   Return manufacturing to your country if it has been shipped offshore. In recent years, wage increases and rising energy costs have caused offshore manufacturing costs to rise to the point that they often end up costing businesses more. If you’ve been manufacturing products overseas, re-evaluate your manufacturing costs and see if it would be cost-effective to return to domestic production.
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Expert Q&A

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• Question

  How can a company reduce costs and increase profit?

  

  Gina D'Amore
  Financial Accountant

  Gina D'Amore is a Financial Accountant and the Founder of Love's Accounting. With 12 years of experience, Gina specializes in working with smaller companies in every area of accounting, including economics and human resources. She holds a Bachelor's Degree in Economics from Manhattanville College and a Bookkeeping Certificate from MiraCosta College.

  

  Gina D'Amore

  Financial Accountant

  Expert Answer

  Take a closer look at the company's finances and see where the money is not being well spent so you can logically reduce expenses. To increase profit and growth, try improving your customer services so you have a stronger word of mouth. Also, never stop networking!

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