One nice thing about fixed expenses is that they stay constant and usually don’t fluctuate. The bad news, they’re usually set in stone and can’t be cut if you’re looking to lower expenses.
But according to Aaron Evett, director of implementation of the expense management and business budgeting software company Divvy, you don’t have to be stuck with “fixed expenses” that you might not have to pay for.
Fixed expenses related to debt
In the ResourcefulFinancePro webinar “5 Meaningful Ways to Cut Costs and Improve Cash Flow in 2022,” Evett offered three different strategies:
- Different types of lenders and credit lines on standby. “If one vendor comes back and increases interest rates or they decrease credit lines, then you have … options that you can go use. And you’re prepared for those situations before (they create) an emergency situation,” he said.
- Consolidate loans with a single lender. It could decrease interest and simplify payment strategy.
- Refinance. With interest rates noticeably higher, consider refinancing if you can get more favorable payment terms.
Payroll fixed expenses
Here are four tactics other companies are using now to reduce payroll costs:
- Hiring less expensive interns and entry-level employees to cover back-office functions that can be trained and can grow with the company.
- Increasing tax-deductible employee benefits to decrease salary costs and limit the impact on the budget.
- Using technology to automate and scale the business. The investment may initially seem like a lot, but in the long run, it can save spending on the bigger fixed expense of hiring staffers to perform manual-intensive tasks, and
- Downsizing, but only as a last resort because hiring and training costs are higher than ever.
Trimming bills and services costs
Evett said your cost cutting strategy also needs to involve a combination of leveraging your “old friends” (current suppliers) and “new friends” (future suppliers).
Renegotiating prices via volume, terms, etc., with your long-time vendors can lead to savings that boost the bottom line. And if you still feel like you’re getting overcharged for something, maybe it’s time to start shopping around for new vendors that offer savings that you’ve been missing out on.
Are there any vendors you’re not getting early payment discounts from? A 2% discount for paying within the first 10 days, for example, can make a difference. Paying your bills early can also eliminate late fees and interest costs, while improving your organization’s credit score.
