Managing Costs Cost Control and Reduction Cost control and reduction refers to the efforts business managers make to monitor, evaluate, and trim expenditures. These efforts might be part of a formal, company-wide program or might be informal in nature and limited to a single individual or department. In either case, however, cost control is a particularly important area of focus for small businesses, which often have limited amounts of time and money.
Cutting these costs is as effective as cutting the direct variable costs of labor and materials.
Till , when the world economy was booming, “growth” was the favoured strategy in C-suites. After Lehman Brothers collapsed and global growth contracted, “cost-cutting” became the mantra, and it has stayed that way since. The takeaway for corporations in this long slowdown has been that a cost-cutting exercise is much more than a sum of sharp cutbacks. Organizing a Cost-Reduction Program The Bottom Line action, meet at least once a week and maintain an action plan to create and sustain cost-reduction momentum. Key Questions The exercise described here lends rigor to the effort. Organizing a Cost-Reduction Program 9. Unless cost cutting is new to the company, you’ve already done away with most discretionary, comfort, and non-mission-critical perks and activities, such as holiday parties, event tickets, and.
Figuring out how to reduce or eliminate specific administrative costs is essential to the profitability and long-term success of your company.
Trimming these expenses will decrease the revenues necessary to break even or make a profit, provide greater flexibility in long-term pricing strategy, and improve cash flow. How to Cut Administrative Expenses 1. Ownership or long-term leases increase your fixed costs and financial exposure.
While month-to-month rental agreements tend to cost a little more in the short-term, the ability to end the agreement and relocate to a more suitable space saves money and liability in the long run.
Limit Travel and Entertainment Expenses Client relations is always important and should never be compromised. Establish an entertainment policy which fits the economy; your clients and prospects will understand since their company is probably implementing similar policies.
Telecommute Technology cost cutting exercise business plan reduces distance, so there is no need to require administrative people or specialists to be physically located together. Employees who work from home or in month-to-month temporary facilities reduce or eliminate the high cost of office space, as well as the demand for support services.
In many cases, employees with the opportunity to telecommute will take less salary due to the freedom and lack of commuting costs.
Sublease Office and Yard If you have excess space that will not be used for a year or more, investigate subleasing.
Before agreeing to a sublet, you should be confident that the space will not be needed during the term of the agreement. Include language in the contract for early termination if it becomes necessary.
Refinance Debt Interest rates are unusually low at this time. If you have any long-term debt on equipment, machinery, or real estate, now is the time to refinance with the goal of reducing payments as much as possible for the near term.
In hard times, cash is kingso you want to keep as much as possible close at hand for emergencies. Eliminate Subscriptions and Memberships Over time, many companies add subscriptions and memberships due to their industry and the small expense involved for a single affiliation.
These expenses can rapidly build up and go unnoticed, however, as they often appear on different schedules and expense reports. Review all your social, fraternal, and business affiliations to ensure they are necessary and contribute regularly to the profitable operation of your company.
Eliminate those which do not. Cut Travel Costs Where possible, eliminate travel, replacing the trips with phone calls, emails, and video meetings.
Increase the scrutiny of your expense accounts to send a clear message to your staff that costs are important. When you travel, stay in business hotelsrather than luxury hotels, as they are often half the cost of a four-star facility.
And everyone who travels should be members of the affinity group sponsored by that hotel to gain discounts and free nights. If staying in a larger city, consider the use of taxis instead of renting a car.
Eliminate Paper Managing paper is time-consuming and expensive. Purchase a scanner and digitize all important papers and keep them in well-organized electronic files to save space and administrative costs.
Share Marketing Expenses Identify products or services which complement your product.Till , when the world economy was booming, “growth” was the favoured strategy in C-suites. After Lehman Brothers collapsed and global growth contracted, “cost-cutting” became the mantra, and it has stayed that way since.
The takeaway for corporations in this long slowdown has been that a cost-cutting exercise is much more than a sum of sharp cutbacks. 4 Winning Cost Cutting Strategies. Select one of these four areas to begin your own cost-cutting exercise in your business right away and .
Unless cost cutting is new to the company, you’ve already done away with most discretionary, comfort, and non-mission-critical perks and activities, such as holiday parties, event tickets, and. Operational efficiency – it’s not just about cost cutting costs and are not aware that the real business value can be destroyed if approached purely as a cost cutting exercise.
If we are going to look at efficiency, we should aim for a consistent definition. I can produce a business case which meets your cost reduction needs. In.
Consolidate incidentals. Unless cost cutting is new to the company, you’ve already done away with most discretionary, comfort, and non-mission-critical perks and activities, such as holiday.
Oct 31, · Cost-cutting Strategy: Expense Category This is the most common method small business owners use to cut their excess costs. It's simple, .