How to Reduce Vendor Expenses?

[gravesa8]

I'm doing a research paper for high school hoping that this will help me start my own business and I wanted to ask what are your biggest monthly expenses when it comes to vendors? (payroll service, insurance, POS system, etc.)

Or what services do you require to keep your business running? (internet/phone, shredding pickup, etc.)

Sorry if this is a bit vague but I'm trying to identify where businesses spend the most money with vendor services.

Thank you,
Andy

[Fulcrum]

Just don't pay the bills. You'd be surprised as to how many large, well known, companies use this tactic to strong arm their smaller vendors.

Note: I do not condone nor do I endorse this tactic. I believe that all products and services should be paid for before the owners and shareholders receive any profit.

Edit:
I just realized I answered the question in the title and not the post itself.

[vangogh]

The answer is going to vary a lot from business to business. In general online business will have less expenses overall, since there's no office. Larger companies with employees will have more expenses. I realize this is for a school paper, but are you doing the research for a specific type of business? If you are let us, because we can probably give you better answers.

In my case my business is entirely online and I'm the only employee. I'm a freelance web designer and the last few years I've been increasing my revenue from writing projects. I also own this forum. None of them have high expenses as far as business go. My biggest expense is really my own time, since I work on my own sites. I maintain them and write for them and both take a lot of time.

As far as actual money is concerned, my hosting bill might actually be my largest bill each month. Naturally I need an internet connection and a phone to stay in contact with people. The majority of expenses for me really aren't large expenses. I buy and upgrade software at times too. Now that I think about it my biggest expense is replacing the hardware. I do need new computers more frequently than most and I generally buy more expensive computers. Add in all the peripheries like extra hard drives and networking equipment, microphones and video equipment and that's probably the big ticket expense. It's not a monthly expense though.

Again if you have a specific type of business in mind let us know what it is. If you don't have one business in mind you can gives us a few more details about what you're thinking. The more details you can give us, the better replies we can give you.

[turboguy]

I would have a hard time listing all our expenses. For us salaries are a big one, as is freight, employee benefits and one that many of us would have would be bank fees, for the biggest part those fees for processing credit cards. That runs nearly a hundred grand for us.

As far as reducing costs I would say the keys are to never believe you can't cut a cost. If you try you might be surprised. Don't hesitate getting competitive quotes. Companies that know you are talking to other companies will be slow to raise your fees. I will give an example here. For the past two years we had a letter from our insurance company prior to renewal saying our rates were going up. We got competitive quotes both years which required our current company to furnish 5 years of loss runs so the insurance company knew we were looking at other companies. Both years instead of the rates going up they went down.

My third tip would be to think long and hard about if you really need a service. We were having profitability problems a few years ago and looked hard at any ways of cutting costs. We decided things like our postage meter were really not that necessary. In the end we reduced costs from 52% of sales to 41% of sales. Our profitability went from being terrible to being well above most companies in our industry. We did do some things that were not on the expense side that helped as well but keeping our costs as low as possible was a key factor.

[Brian Altenhofel]

If it's a large recurring expense like web hosting, you can often negotiate the contract. Many vendors will do discounts for spending level commitments or term commitments or full payment up front.

[Tena]

I handle the records for a variety of types of companies. In my experience the following seem to be the top expenses for any company.

Inventory - Falls in the below once things are sold, but before that its just an asset.
Cost of Goods Sold - meaning anything a company must have in order to produce it's income, if you sale products then the product or components for the products.
Subcontractors - Falls into the above area also.
Payroll and Payroll tax, Fica, Suta, Futa, and state taxes if your in a state that collects them. (Yet I believe in paying a living wage)
Merchant Fees - this will range from company to company and in some can be quite large.
Advertising and Promotion - Also will range from company to company and can be quite large.
Rent or purchase of a building, and this can be an expense depending on the size of the company, do you need warehousing, just office, etc.
Transportation - Do you or employees travel a lot - For a restaurant on wheels this is significant and for many other companies that must travel for the scope of their work
Insurance - and this is will only grow from the looks of it.
Equipment, computers, all the assets required for the type of work
Software
Office supplies
Shop supplies and small tools perhaps
Telephone and internet

The list could go on and on depending on the type of business your talking about. It seems that human nature is set to spend what they make and often it seems they jump into more than they should before their need it or are ready too and we don't like to give up what we believe is status quo or progress.

The trick is to spend what you need, be careful of the wants, build up some reserves, hire only those you need, take care of them as you expect them to take care of you. Go into expenses with your eyes wide open, know your limits, do your homework, keep a good eye on your finances, prepare for hard times because they will come.

[freddie]

Just don't pay the bills. You'd be surprised as to how many large, well known, companies use this tactic to strong arm their smaller vendors.

Note: I do not condone nor do I endorse this tactic. I believe that all products and services should be paid for before the owners and shareholders receive any profit.

Edit:
I just realized I answered the question in the title and not the post itself.

At first, your response seems funny. But it seems to reflect a sad reality!

[tallen]

For one of my businesses, the top five expenses by vendor (not counting taxes) were for: Waterfront Maintenance; Insurance; Electricity; Laundry; Heating Oil...


For another business, the top five expenses by vendor were for: Insurance; Supplies; Advertising; Transaction Processing Fees; Advertising...

Sorted and summed by category the top five expenses (for vendors) were for: Insurance; Advertising; Supplies; Transaction Processing Fees; Fuel....