In tough economic times, many businesses struggle to free up cash flow to stay solvent, let alone profitable. One of the most important things a small to mid-sized business owner can do in this tough credit market is find easy ways to cut business costs.

While employee salaries represent the biggest costs to most businesses (other than raw materials, where applicable), keeping employees on board is a smart strategy if business owners can afford it because it leaves in tact the human capital necessary to expand and meet increased demand for products and services when the economy improves. Instead of laying off employees, businesses should focus instead on reducing their overhead expenses, many of which have a tendency to get out of line (i.e., disproportionately large) during good times, when convenience and efficiency are chosen at a higher expense to keep work-flow smooth.

But reducing overhead is no easy task. Here are a few areas on which businesses should focus:

1. Rent. Many businesses settle on large or impressive spaces during good time in order to impress clients and please employees, but high rents contribute most to overhead – overhead which is hard for many businesses to cover as business slows. With the market at lows, moving to a less expensive space will free up cash flow and allow the smart real estate shopper to find an equally useful space at a fraction of the cost, freeing up cash for growth.
2. Office supplies. The cost of toner, paper, and printers, and even stamps are a large cost of doing business. Many businesses order from one or two suppliers to keep things “efficient,” but shopping around will get businesses the lowest price on all their supplies.
3. Energy costs. Electricity, diesel, natural gas and gasoline represent large costs for many businesses. Hedging against future (inevitable) increases in energy costs will free up cash in the future, and can be easily done through energy companies or by holding stocks that track the price of energy (e.g., UGA tracks the price of gasoline.)
4. Telecommunication costs. It is easy to reduce telecommunication costs by switching from multiple solution providers to one provider. Business voip solutions reduce telephone and internet bills especially well for small and mid-sized businesses by employing a flat-rate structure for voice and data transmission – great for making all those cold calls necessary to generate business.