15 ways CFOs can reduce operating costs and expenses

Operating costs are the day-to-day expenses of running a business, including wages, rent, utilities, supplies, maintenance, insurance, and administrative expenses. These fixed and recurring expenses include everything from employee salaries and benefits to facility maintenance and technology infrastructure and represent a critical focus area for strategic cost management and operational efficiency. Whether a business makes one sale or a thousand, these costs continue to accumulate and must be managed effectively to maintain profitability.

The types of operating costs you incur will vary based on your industry and business model. Manufacturing companies might pour resources into equipment maintenance and raw materials, while retail businesses prioritize inventory management and store operations. Service-based companies often see higher costs in professional development and technology systems. While each industry's cost profile is distinct, mastering the nuances of these operational expenses isn't just about survival — it's the cornerstone of sustainable growth and market leadership.

Reducing operating costs is just good business practice. It strengthens a company's financial health by improving profit margins without requiring increased sales. This creates opportunities for business growth, whether through market expansion, new product development, or improved customer service initiatives.

Lower operating costs build resilience against market fluctuations and economic downturns. When regular expenses are well-managed, businesses gain the flexibility to adapt swiftly to competitive pressures and unexpected challenges.

The process of reducing operating costs often leads to an improved business. As companies examine their expenses, they frequently discover opportunities for process improvement, waste reduction, and increased efficiency. These improvements can enhance customer satisfaction and employee productivity, creating a positive cycle of business improvement.

Every dollar saved in operating costs directly impacts your bottom line, yet many businesses struggle to identify the right opportunities for sustainable cost reduction. Discover 15 proven ways that successful companies use to streamline expenses and boost profitability without sacrificing quality or growth.

1. Restructure debt and financial obligations

Every successful cost reduction strategy starts with a close look at your debt structure. Smart CFOs know that refinancing loans at lower interest rates can immediately impact the bottom line. By consolidating multiple loans and negotiating better payment terms with lenders, your organization can significantly reduce monthly expenses. Regular reviews of lending relationships often reveal opportunities to decrease interest expenses and improve business cash flow.

2. Implement zero-based budgeting

Transform your financial planning with zero-based budgeting, a method that challenges traditional assumptions about business expenses. Instead of carrying forward last year's budget, each department starts fresh, justifying every dollar they need to spend. This approach helps you uncover hidden costs and eliminate unnecessary expenses that have quietly grown over time. You'll be able to dig into long-standing expenses and even discover new ways to allocate resources more effectively.

3. Optimize working capital management

Take control of your company's cash flow through strategic working capital management. Start by streamlining your accounts receivable processes to get paid faster. Negotiate extended payment terms with suppliers while maintaining strong relationships. Fine-tune your inventory levels to reduce carrying costs without risking stockouts. These improvements work together to improve working capital, strengthen your cash position, and reduce reliance on expensive external financing.

4. Consolidate vendor relationships

Build stronger, more cost-effective vendor partnerships through strategic consolidation. Begin by auditing your current contracts and analyzing spending patterns across departments. Develop a supplier negotiation strategy that helps you reduce your vendor base while securing volume discounts. This streamlined approach not only cuts direct costs but also simplifies your procurement processes and reduces administrative work. Focus on building deeper relationships with fewer vendors who can offer better terms and more responsive service.

5. Review and optimize tax strategies

Smart tax planning can significantly impact your bottom line. Start by taking a fresh look at your tax strategy to uncover hidden savings opportunities. Regular reviews help you maximize available credits and deductions while ensuring compliance. For businesses operating across borders, evaluate your international tax structures and transfer pricing policies — these often hold untapped potential for substantial tax savings. Remember, tax optimization isn't about aggressive tactics; it's about making informed decisions that benefit your business within legal frameworks.

6. Implement financial shared services

Transform your financial operations by centralizing shared services. This modern approach drives operational efficiency by eliminating redundant processes and creating powerful economies of scale. Think about it: instead of having multiple teams performing the same tasks across different locations, you can build one highly efficient operation. By standardizing processes and removing duplicate functions, you'll not only reduce costs but also improve service quality. Many organizations find this shift leads to both immediate savings and long-term operational improvements.

7. Enhance financial technology infrastructure

Modernizing your financial technology can help your business operate more effectively. While the initial investment might give you pause, the long-term benefits often far outweigh the costs. However, implementing automated financial processes, advanced analytics tools, and robust ERP systems is proven to reduce manual work while gaining deeper insights into your business operations. These tools don't just save time — they help you make better, data-driven decisions that impact your bottom line.

8. Optimize real estate portfolio

Your real estate strategy might be hiding significant cost-saving opportunities. Start by reviewing your current property leases and space utilization. Consider using flexible workspace solutions that adapt to your team's actual needs. Many organizations discover they can substantially reduce their real estate footprint through smart consolidation, without sacrificing productivity or employee satisfaction. The key is finding the right balance between physical space needs and modern work patterns.

9. Restructure employee benefits

Competitive employee benefits don't always mean you have to spend more. Take a strategic approach to reviewing your healthcare plans, retirement offerings, and wellness programs. Look for innovative solutions like self-insurance options or preventive health initiatives that can reduce long-term costs. The goal is to maintain or even improve the value you offer employees while optimizing your spending. Focus on programs that deliver the most meaningful benefits to your team while cutting the ones that have less impact.

10. Improve energy management

Transform your approach to energy consumption and watch your savings grow. Start with a comprehensive energy audit to understand where your money goes. Smart investments in energy-efficient technologies, from LED lighting to smart HVAC systems, can dramatically reduce your monthly bills. Consider renewable energy options that align with your sustainability goals — solar panels, energy-efficient equipment, and smart building controls often pay for themselves through reduced operating costs. The best part? These green initiatives show your commitment to environmental responsibility and can open up new vendor relationships.

11. Strengthen financial controls

Take command of your spending with robust financial controls. Think of these as your financial guardrails — they help prevent unnecessary expenses while protecting your business from risk. Implement sophisticated spend management systems that flag unusual patterns and automate approval processes. By strengthening your internal audit functions, you'll catch potential issues before they become problems. Remember, good financial controls don't just reduce waste, they build a foundation for sustainable growth.

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12. Optimize capital allocation

Make your money work harder through strategic capital allocation. Every investment decision should align with clear ROI thresholds and support your broader business goals. Develop strict investment criteria that help you evaluate opportunities objectively, and then monitor project performance regularly to ensure you’re getting the expected returns. This disciplined approach helps you avoid wasteful investments and focus resources where they'll generate the most value.

13. Review insurance programs

Don't let insurance costs eat into your profits unnecessarily. Take a fresh look at your coverage levels and consider whether higher deductibles might lower your premiums without adding excessive risk. Explore innovative options like captive insurance companies that could offer better value for your specific needs. Regular market comparisons ensure you're getting competitive rates, but remember — the goal is optimal coverage at the best price, not just the lowest cost.

14. Enhance financial planning and analysis

Power up your decision-making with stronger financial planning and analysis capabilities. Start with accurate cash flow forecasting to better understand your financial position. Implement rolling forecasts that help you anticipate and adapt to changing conditions, and upgrade your budgeting processes to be more dynamic and responsive. Enhanced reporting capabilities give you deeper insights into cost drivers and saving opportunities. When you can better predict and understand your costs, you're better positioned to control them.

15. Review organizational structure

Sometimes the biggest savings come from rethinking how your organization operates. Take a critical look at your current structure — are there opportunities to streamline? Analyze your span of control and look for ways to reduce management layers without sacrificing effectiveness. Consider consolidating support functions to eliminate redundancy. A well-designed organizational structure doesn't just reduce costs — it helps your business operate more efficiently and respond more quickly to opportunities.

The most successful cost reduction initiatives balance short-term savings with long-term sustainability. Start with quick wins to build momentum, but focus on creating lasting change through systematic improvements. Regular monitoring and adjustment ensure strategies remain effective as business conditions evolve. Remember that cost reduction is not a one-time exercise but rather an ongoing process that requires constant attention and refinement.

Understanding the true impact of cost reduction initiatives requires more than just looking at bottom-line savings. A comprehensive measurement approach helps organizations validate their efforts and identify areas for further improvement. By tracking the right metrics and maintaining a commitment to continuous improvement, businesses can ensure their cost reduction strategies deliver lasting value. Here are some considerations for measuring these changes effectively.

Key performance indicators (KPIs)

Effective cost reduction measurement starts with selecting the right KPIs that align with your business objectives. Your operating expense ratio (OER) tracks operational costs as a percentage of revenue, providing a clear picture of cost efficiency over time. Cost per unit gives manufacturing and service businesses insight into production efficiency, while employee productivity metrics help evaluate workforce optimization efforts.

Financial metrics tell only part of the story. Quality indicators ensure cost reductions don't compromise product or service standards. Further, customer satisfaction scores and employee engagement metrics help identify whether cost-cutting measures affect service delivery or workplace morale. Real-time tracking of these KPIs through dashboards and regular reporting helps organizations spot trends and address issues before they impact the business.

Continuous improvement

Cost reduction is an ongoing process that requires constant attention and refinement. The most successful organizations embed cost management into their cultural DNA, making it part of everyday decision-making rather than a periodic exercise. Regular performance reviews should examine both successful initiatives and those that fell short, extracting valuable lessons from each experience. Monthly team check-ins allow department leaders to discuss progress, challenges, and new opportunities, while quarterly reviews provide a broader perspective on cost reduction trends and outcomes. This systematic approach ensures that cost management remains a priority while encouraging teams to find innovative ways to operate more efficiently.

Beyond tracking metrics, organizations must focus on creating sustainable change through their cost reduction efforts. This means looking beyond short-term savings to identify structural improvements that can deliver long-term value. By combining clear metrics with a commitment to continuous improvement, organizations create a culture of cost consciousness that drives lasting results. The most effective cost reduction programs balance the need for immediate savings with investments in efficiency-driving technologies and process improvements, ensuring that cost management becomes a source of competitive advantage rather than just a financial exercise.

Optimizing operating costs shapes how businesses grow and thrive, going far beyond simple expense reduction. Success comes from building sustainable practices and creating a culture where smart cost management becomes part of your company's DNA. The strategies outlined in this guide serve as stepping stones toward transforming your organization's cash flow management and operational efficiency.

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Teddy Collins, VP of Corporate Finance at SeatGeek, says Brex helped the ticketing platform reinvest in its team with the money they saved: "With Brex’s completely integrated spend management and travel, we were able to cut T&E costs by 50% with only a 15% reduction in travel. And we redeployed those funds to actually double the size of our hiring funnel at that time.”

Ready to transform how you manage your operating costs? Sign up for Brex today. Whether you're looking to simplify your expense tracking, automate your accounting, or find the best business banking solution, we've got you covered. Join thousands of growing businesses who have already discovered the power of our all-in-one financial platform. It takes just a few minutes to get started, and our team is here to help every step of the way.