Do you worry that you are paying some of your suppliers too much?  

• You are all over your core costs since they make up such a significant part of your total expenses.
• But what about the all of your non-core costs?

• These are the products and services that you need to run your business that individually may not seem significant but taken together quickly add up to a substantial cost to your business. 

Cost reduction always gets a lot of lip service but when it comes right down to it many non-strategic expense categories get overlooked.  However, with some time and effort there can be a goldmine of additional profits just waiting to be mined.

Businesses also can use the savings from these areas and leverage them further by investing these savings to fund expanded marketing programs or research and development initiatives.

Here are 10 tips that can get you on your way to lower costs and higher profits:

10 ways to cut non-strategic costs

1. Walk the talk.Let your staff know that you care about saving money, and practice what you preach, even when it comes to small, everyday things. It highlights the importance of keeping expenses down and may motivate others to take similar steps.

2. Benchmark your business against similar organizations.You may think your costs are under control, but have you actually collected data to make your case? Compare your company's expenses against others in your industry or other businesses that use the same products and services.

3. Understand the market for the goods and services you buy.What new technologies are out there that may be cheaper? Ask current suppliers what they can do to help you cut costs.  Often a phone call to a supplier can uncover useful information that is available just for the asking.

4. Analyze how you are spending your money.A little knowledge goes a long way when it comes to bargaining. Know what you need and the prevailing market price for the product or service you're looking for before you enter into negotiations.

5. Don't buy more than you need.Analyze your needs before shopping for any products or services.  For example, do you really need the photocopier that copies at the fastest speed available and has all the bells and whistles? Many suppliers will try to sell bigger, faster, higher-tech versions when something more modest will suffice. Avoid being swayed into paying for something you don't need and will never use.

6. Keep plugged into the markets. Know what input costs drive your suppliers cost structure and track those drivers so you know when to refuse a price increase or ask for a price cut.

7. Beware expensive service contracts. Don't automatically accept a great price on a piece of office equipment, for instance, then blindly agree to an overpriced service and maintenance package. Many suppliers make more money from such add -ons. Get the best price on the product, then look at how it will be serviced.

8. Beware of relationships with suppliers that are too close.  Suppliers are experts at building and maintaining close personal relationships with key staff members, using freebies like tickets to a hockey game or a good meal on their tab. Remember, you never get anything for nothing.

9. Always be vigilant.Suppliers will charge what they can get away with, so let them know you're watching. Don't automatically accept the reason given for why prices have to be raised. Suppliers will often back down if you let them know you have other options.

10. Don’t be afraid to seek professional help.If you don't have the resources, time or inclination to do this sort of expense-reduction exercise on your own, consider using an outside consultant who specializes in ways of cutting down on non-strategic costs.  Focus on what you do best and outsource the rest.

Stephen Machin, CMA is a cost-management specialist with ERA Canada.  If you would like a free 30 minute consultation on how to reduce your overhead cost, fill out the online form, email me or visit www.eracanada.com.

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