Cost reduction strategies for business expenses

Reducing costs across your organisation isn’t just about saving money; it’s about identifying inefficiencies and redirecting resources toward higher-value activities.

And it’s not just you looking to reduce costs; 52% of CFOs rate cost reduction as a top priority, according to Deloitte. Cutting budgets isn’t the hard part. The hard part is stopping cost leakage before it hits the P&L. By the time spend shows up in a report, the money is already gone.

You need to cut costs and maintain growth. This guide explores some strategies to help you find that balance.

Six strategic cost reduction approaches

So, how can you reduce costs when it comes to your business expenses? Here are six.

Overhaul how you manage subscriptions

Companies waste $18 million every year on unused SaaS licences. So, optimising your subscription management could be a pretty good start when looking to reduce costs. You need to efficiently remove duplicate tools (maybe you have two SEO software subscriptions or multiple video meeting software), and track price fluctuations so you can see which tools are too expensive and which you can look to downgrade.

Also, look for opportunities to consolidate suppliers if you find you subscribe to a few similar tools; export data quarterly, and ask budget owners whether teams are actively using each subscription.

Optimise your procurement and supplier management

There are plenty of opportunities to optimise costs within your supplier relationships.

1. Negotiate your contracts and review agreements every year. Don’t auto-renew them without scrutinising. Look into volume discounts and extended payment terms.
2. See if you can consolidate your suppliers. By consolidating, you streamline your admin responsibilities and improve spending power with your chosen suppliers.
3. Eliminate maverick spending. Rogue and unauthorised spending can cause financial headaches. You need proper corporate spending controls to keep every penny accounted for and protect negotiated contract rates.

Automate your processes and integrate AI

Manual processes drain finance team resources. Nick Millard, VP of Finance at GDS Group, explains a pretty common situation:

Since we've implemented Payhawk, the benefits have been enormous. Before Payhawk, it was one person's full-time job to chase receipts, code credit card statements to the P&L, and manage costs and credit cards.

That’s not just an efficiency gain. It’s a shift in how finance operates. When manual reconciliation disappears, your team stops processing transactions and starts analysing performance.

Automation reduces admin cost, shortens the month-end close, and improves forecast accuracy in one move.

The time it takes to maintain manual processes is inefficient. Automation has a transformative effect on managing company spend. OCR extracts all the important information from receipts and invoices, AI categorises expenses automatically, and ERP integration ensures real-time reconciliation with no duplication.

Make operational efficiency improvements

Before you overhaul your processes, you need to understand where your current bottlenecks are. For example, are there any expenses currently requiring excessive approvals? And what information are people repeatedly requesting?

If there’s a disconnect between finance and other departments, everything can grind to a halt, approvals are slow, overspend is rife, and it becomes increasingly difficult to pinpoint spend and forecast accurately. Which all means scaling is going to be hard work.

Finding an expense tool that encourages effortless inter-departmental communication is a must.

Bridging those comms gaps is essential to unlocking operational efficiency, as Howard Thompson, Global Financial Controller at GDS Group, knows only too well:

The great thing about Payhawk is the amount of collaboration that now takes place between finance and the rest of the business. Payhawk has really helped finance move into an enablement role.

Consider evolving your workplace strategy

Not every worker is now solely office-based; 41% of workers now work remotely for at least some of their week. That represents a huge shift in working dynamics and gives you a great opportunity to streamline your office-related business expenses and reduce costs.

Before you take that leap and implement a remote workforce, consider how finance teams will manage expenses. Cloud-based expense management tools are perfect for managing spend across countries and entities.

Optimise energy and utilities

Running a business is expensive, including hiring staff, purchasing equipment, stocking up on inventory, and paying insurance. They’re all the obvious costs. But what about all the money you’re wasting on energy and utility bills? There are plenty of ways you can reduce costs here, from negotiating multi-site contracts to unlock better rates to installing smart meters and using LED lights.

You can use your spend management software to help you better manage your recurring bills, giving you the chance to earn cashback on eligible payments or create budgets to help budget owners see real-time utilisation by supplier before approving any payments. Implement recurring purchase requests for fixed contracts to ensure the right person approves the renewal instead of it renewing silently.

Steps to implement your cost-cutting strategies

Here are four steps you can take to help you execute your strategies.

1. Analyse your current spending patterns

Conduct a comprehensive spend analysis. This means gathering data from purchase orders, invoices, expense reports, and credit cards. Are there any particular categories that show growth, or perhaps there are duplicate vendors?

2. Set SMART targets

Your targets should be specific, measurable, achievable, realistic, and time-bound for them to drive results. So skip vague targets like ‘reduce travel costs’ and instead refocus, ‘reduce travel costs by 10% over the next 12 months by using a travel AI agent and automatic policy compliance.”

Don’t forget to assign ownership to your targets to ensure accountability.

3. Communicate the ‘why’ with your team

Your teams need to understand why you need to cut costs so they can get behind every initiative and new process and drive cost consciousness. Perhaps you need to save admin time to help drive efficiency across the business, or you plan to open a new entity or expand the team. Communicate your plans with everyone, then any tech you do implement to help manage expenses going forward will have high adoption rates.

4. Monitor, measure, and adjust your strategies

Cost reduction strategies need constant management and tweaking to ensure effectiveness. Create dashboards to monitor key metrics like approval cycle time, average expense amount, and policy compliance rates, along with supplier performance. and routinely review. If you don’t meet targets, explore and find out why. Adjust the goals if unrealistic or remove preventable obstacles.

If you do meet targets, see what you can learn from those processes and apply them to other departments.

How Payhawk enables cost reduction

Cost reduction doesn’t happen through one-off initiatives. It happens when financial discipline is built into everyday workflows. That means controlling spend before it happens, not cleaning it up afterwards.

The good news is that software like Payhawk exists to make everything as effortless and transparent as possible. Cost reduction isn’t a chore when you can simplify everyone’s expense-related tasks.

Here’s how Payhawk helps you control and cut costs:

• Proactive spend control. Having real-time visibility into expenses helps you prevent overspend before it can happen. Set spending limits by department, project, or employee, create approval workflows that escalate based on category or amount, and block specific merchant categories or require receipts before transactions clear.

With this proactive approach to spend, finance teams aren’t chaotically cleaning up manual errors and chasing receipts; they’re able to focus on strategic insight to drive real business change.

• Hidden cost elimination. By manually managing expenses, you will inevitably have hidden costs from hours spent on data entry and employees waiting days for reimbursement to mismatched reconciliation records when completing the month-end close.

You can avoid all of this with Payhawk’s automated workflows, OCR data capture, and accounting system integrations.

Kiril Boradjiev, Co-founder at HRS, explains the impact Payhawk has had on their team:

We can now see where money is being spent and why, all in real time. And we have found ways to save money because of good spend visibility.

• Subscription and supplier management. Our subscription management features give you complete visibility into all of your recurring expenses. You can effortlessly identify duplicate subscriptions across departments and track utilisation to pinpoint underused services. Our system lets you set alerts for upcoming renewals, track spending by vendor, and monitor payment terms to take advantage of payment discounts, if cash flow allows.

• Financial optimisation through integration. By connecting your ERP and accounting systems, you ensure seamless data flow. That means you can customise fields to enable granular expense categorisation, and you can track spending by any dimension you require. And all this means you can report with precise data, which is essential when seeking cost-reduction opportunities.

Integrating systems means you don’t have to enter data twice, wasting time and introducing errors, but instead can enjoy real-time insights to make impactful business decisions.

Cost reduction will remain a top priority for UK finance leaders

Cost reduction is all about optimising your processes. And leveraging a platform like Payhawk helps you transform those processes with automation, AI, and machine learning. Utilising modern tech like this means your finance team gains efficiencies across all spend management processes while helping the entire organisation adopt more of a cost-conscious approach to company spending.

If you’re ready to transform your approach to business expense management, then sign up for a no-obligation product demo to see how we can help your organisation strategically reduce costs through intelligent spend management.