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How to Reduce Operational Costs

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Jasmine Simon

Operating costs include charges required to maintain and administer your business on a daily basis. Other words commonly used besides operating costs are operational expenses, operating expenses, operational expenditures, or OPEX.

Cost of Goods Sold (COGS) is one of the main operating costs' components. COGS include direct costs associated with producing your company's services or goods. Other operating expenses include the following:

• Labor costs, like payroll

• Employee pensions, health insurance, and other benefits

• Sales commissions

• Depreciation

• Amortization

• Maintenance costs

• And more

To be more profitable, not only do you need to be prosperous in sales and revenue, but you also must reduce your operational costs. Reducing operational costs can be done in several ways which are as follows:

1. Establishing a cost-reducing objective

You should do a thorough evaluation of your business expenses. Then, you can start working on reducing your business costs.

2. Embracing technology

Marketing Software in a tablet

There are a plethora of software programs and online systems that can streamline and automate small business functions. These systems can assist in a broad array of operational areas, including website hosting, accounting, payroll, marketing communications, and more.

3. Outsourcing

Outsourcing some business practices to a third-party expert can significantly improve efficiency. One way to do this is by hiring a tax expert to do your taxes or accounting, if you don't have a tax law background. Another way to outsource is through IT operations. There are plenty of top-notch services with spectacular package plans for companies.

4. Check for better prices

When it comes to different types of vendors you use for your company, it is important to research and find services that can deliver better value for your money and consult with them. Then, you can set up a bidding system.

5. Telecommuting

Your financial resources can become drained due to utility costs, managing an office, and leasing office space. So, telecommuting could be a good way to reduce your expenses. Making telecommuting arrangements can save you ten of thousands of dollars per year from vehicle repair expenses and gas.

6. Making early or on-time payments on invoices

Paying your invoice early or on-time will keep you from having late fees, more interests owed, or other penalties. Even low-interest rates can become expensive over time.

7. Identifying inefficiencies

Pie chart with total costs of the company

You may be surprised, but being vigilant in identifying inefficiencies may go a long way in reducing operational costs. Your business can be more efficient by reducing waste in time and materials, condensing your procedures and processes, eliminating employee perks, obtaining more energy-efficient equipment, etc.

Even top-notch drop trailer services are a lot more efficient. With it, you can save money, time, and headaches associated with late delivery percentages, overtime for employees, and allowing more space on your dock.

8. Cancel unutilized services

It just makes sense: Why keep a service you don't need especially if you are paying for it? Even if you are planning on reusing the service in the future, it may be better to end the service now and restarting it when you are ready.

9. Go green

Recycle symbol - Go Green

You can go green in many ways that will significantly lower your expenses. In addition to getting energy-efficient equipment, you can replace regular light bulbs with compact fluorescent lighting, lower cooling, and heating costs by applying window treatments and installing insulation, installing a water filtration system, recycle and reuse, and more.


Reducing operational costs, and gaining more sales and revenue will make you as prosperous as possible. Whether it is eliminating some costs with COGS, labor, depreciation, amortization, health insurance, and more, it will behoove you to be as efficient as possible for your bottom line. Using the steps above, you will go a long way.

For more information about lowering your operating costs, contact Pallet Market, Inc. today. They can assist you greatly in different ways when it comes to reducing costs for your business. This could be drop trailer services, repairing your pallets onsite, and more.

They are a leader in the pallet market and freight industries in Southern California for over 20 years. So, don't waste your time looking for pallet manufacturers near you. Contact them today.