Gone are the days of growth at any cost. Whether you’re a small startup or an established enterprise, keeping spending under control ensures healthy cash flow, stronger profitability, and long-term sustainability – all crucial in the current economy.
But you must strike a careful balance between reducing expenses and maintaining operational momentum. Cutting costs without a clear strategy can lead to resource shortages, reduced productivity, and missed growth opportunities.
The challenge for many businesses is determining where to make cost reductions without negatively impacting performance. While some expenses are necessary investments in innovation, talent, and customer experience, others can drain resources without delivering meaningful returns.
Smart cost-cutting means identifying and eliminating unnecessary spending while implementing strategies that drive efficiency and optimise financial resources. In other words, putting your available cash to best use.
In this article, we’ll explore some of your best bets to achieve that outcome. By leveraging automation, renegotiating supplier contracts, optimizing operational workflows, and prioritising high-impact expenditures, you can create a leaner and more resilient business.
Cost-cutting doesn’t have to mean sacrificing quality or scaling back on essential services – it’s about spending smarter and making informed financial decisions. Here are five approaches to consider.
Why cost reductions matter
Reducing costs in business isn’t just about saving money – although that’s usually the starting point. Reducing your business expenses has a range of tangible benefits:
- Boost profitability. The most obvious reason: when you lower expenses, your profit margins improve. Even small cost reductions can make a big impact on the bottom line – especially in high-volume or low-margin industries.
- Create financial flexibility. Lower operating costs free up cash that can be reinvested in growth – like hiring, R&D, marketing, or expanding into new markets. It gives you options and more breathing room, and makes unexpected issues easier to deal with.
- Improve business resilience. In uncertain economic times or when revenue dips, leaner operations help businesses stay afloat. Companies that manage costs well are better prepared to weather downturns or unexpected challenges.
- Encourage operational efficiency. Cost-cutting often leads to smarter workflows, automation, and less waste. It pushes teams to focus on what actually drives value, rather than just maintaining legacy processes.
- Support sustainable growth. Keeping costs under control while growing ensures your business stays sustainable long-term, not just during boom periods.
- Increase competitiveness. Lower costs may let you charge lower prices, or deliver higher quality, or faster delivery. Any of these is a real edge over competitors. Efficient businesses can move faster and offer more overall value to customers.
Now, let’s look at five no nonsense cost reduction techniques, fit for any SME.
5 smart ways to reduce business costs
All of these options make sense for most businesses. But which you attack first will depend on your current financial situation and biggest pain points. So they’re in no particular order, but we’ll start with the option most likely to help most businesses.
And as you’ll see, all of these reductions can be achieved with the right cost management tools.
- Track expenses & payments automatically
One of the most significant hidden costs for businesses is the time and effort spent on manual financial processes. Traditional methods of handling payments, invoicing, and expense approvals can be inefficient and prone to errors, wasting your precious human resources to simply track what’s track.
There’s also the very real risk of abuse or overspending. Without real-time, automated payment tracking, you often have no real idea of what’s being spent. And once you discover issues, it can be too late to put the toothpaste back in the tube.
By adopting an automated payments and spend management system, businesses can:
- Reduce administrative costs by minimizing manual data entry and processing errors.
- Gain real-time visibility into spending, ensuring better control over cash flow.
- Improve compliance with company spending policies and reduce fraudulent expenses.
How spend management platforms can help
Spend management platforms automate payments, track expenses in real time, and eliminate the need for inefficient, paper-based processes. This not only saves time but also ensures greater financial accuracy and control.
- Eliminate unused subscriptions & services
Many businesses sign up for tools, software, and services they believe will improve productivity, but over time, these can become redundant or underutilized. Regularly auditing your business subscriptions and identifying unnecessary expenses can free up significant funds.
How to cut subscription costs:
- Conduct an annual or quarterly review of all business subscriptions
- Cancel or downgrade plans that are no longer needed or underused
- Look for bundled services that offer better pricing for the features you use most
How spend management platforms can help
Spend management tracks all ongoing subscriptions all in one place, and shows you the person, team, and budget responsible for each. You know which are due to renew and when, and can quickly make informed decisions on which services to keep or cancel separately.
It’s essentially a live tracker for all ongoing company payments, but with no spreadsheets to manage. So your quarterly review only takes a few minutes.
- Negotiate with vendors & suppliers
Many businesses don’t realise that pricing for services, raw materials, and software subscriptions can often be negotiated. Or you underestimate how often you should have these conversations.
Long-term supplier relationships and bulk purchasing agreements can provide real opportunities for cost savings. And done respectfully, this frequent exercise creates stronger bonds between you and your suppliers which may come in handy when issues arise down the line.
Cost-saving steps to consider:
- Review current vendor contracts to see which are ending soon, and whether renegotiation is possible
- Compare alternative suppliers to ensure you’re getting the best deal
- Leverage bulk purchasing discounts for regularly used products and services
How spend management platforms can help
Similar to subscription payments, spend management platforms monitor regular, ongoing payments. At a glance, you’ll see which suppliers you pay the most to, and whether the amounts paid have changed over time. That way, you instantly know which are your VIP suppliers, and can build a tailored negotiation plan for each.
For businesses dealing with international vendors, using an online spend management platform can provide competitive exchange rates and fee-free transfers, ensuring that global payments are more cost-effective and reducing unnecessary banking fees.
- Optimise employee expenses & travel costs
Employee expenses – such as travel, client entertainment, and office supplies – can quickly spiral out of control if not properly managed. When budgets get squeezed, the first things to get cut are travel and entertainment.
But if done for the right reasons, these costs can serve a real purpose. So rather than cutting outright, it’s better to create clear conditions and then enforce this policy closely. And most importantly, you need to track expenses and approvals in real time. That way, you can prevent unnecessary spending before it even occurs.
How to optimise employee expenses:
- Establish clear guidelines for travel, meals, and entertainment expenses
- Implement a spend management platform that provides real-time oversight
- Encourage remote meetings and other solutions to reduce travel costs
- Emphasize the need to align spending with high-level company goals, rather than just spending an available budget
How spend management platforms can help
This is what spend management was built for. These platforms offer customisable corporate cards with pre-set spending limits, ensuring employees adhere to company budgets while still having the flexibility they need to conduct business. They also give financial controllers and managers real-time oversight of costs, so no unapproved spending slips through the cracks.
- Minimise foreign exchange and transaction fees
For businesses that operate globally, foreign exchange (FX) fees and transaction charges can quickly add up. Many traditional banks charge high margins on currency conversions, leading to unnecessary costs.
But particularly for SMEs, this can seem like a highly technical issue, and too complex to really optimise. Luckily, there are good ways to ensure you never pay more in FX than you ought to.
How to reduce FX costs:
- Use a currency specialist like OFX instead of traditional banks
- Take advantage of forward contracts to lock in favorable exchange rates
- Use a multi-currency account to streamline global payments
How spend management platforms can help
Some spend management platforms – like OFX – have FX features built in. You can save significantly on international transactions by accessing competitive exchange rates, avoiding excessive bank fees, and managing cross-border payments with ease.
Many businesses fall into the trap of equating cost-cutting with reduced investment. But in reality, strategic expense management lets companies optimise resources while still fueling expansion. Cutting business costs doesn’t mean sacrificing growth – it’s about making smarter financial decisions that enhance efficiency and long-term sustainability.
By focusing on eliminating wasteful spending, improving financial visibility, and leveraging technology, you can position your business for continued success, without compromising operational momentum.
One of the most effective ways to control expenses without slowing growth is through automation. Manual financial processes not only consume valuable time and resources but also increase the risk of human error and inefficiencies. Automating payments, approvals, and expense tracking can help businesses gain real-time insights into their financial health while streamlining operations. This lets your team focus on high-value activities, rather than spending time on administrative tasks.
Ultimately, reducing costs is not about making drastic cuts but about refining financial strategies to ensure every dollar, pound, or euro spent contributes to business success.
OFX is a leading financial operations company providing businesses and accounting firms with real-time financial control and visibility to do business anywhere in the world. With an innovative platform and 24/7 human support, OFX automates and simplifies doing business across borders, reducing risk and eliminating routine operational tasks. Offering global business accounts, payments to 180 countries in 30+ currencies and currency risk management solutions to simplify global payments. OFX further enhances business operations by providing corporate cards with spend management, bill payments, vendor management, and integrations with popular accounting and HRIS software, to help achieve better business solutions so accounting firms and businesses thrive.
Headquartered in Sydney, Australia, with offices globally, in the United States, Canada, United Kingdom, Ireland, New Zealand, Singapore and Hong Kong. ISO/IEC 27001:2022 certified in Australia, 700+ employees, listed on the ASX since 2013, licensed in 50 jurisdictions and regulated by over 50 regulators globally. OFX has been a trusted innovator in global money movement for over 25 years.
For more information about OFX and its financial automation solutions, visit www.ofx.com
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By implementing these strategies and leveraging the right financial tools, your business can maintain growth while keeping expenses under control.
This article is purely for informational purposes only and should not be treated as advice. OFX will not be held liable for any losses incurred as a result of individuals or businesses relying on the information contained in this article
