The local and international economy is going through one of the most challenging times in history. Those businesses that ensure they maximise profit will not only survive this period but should also find this is great time to increase market share and margins. While people and premises are normally the largest expense areas, and strategic expenses are under constant review, don’t take your eye off all expenses. Remember $100 revenue in most businesses may only contribute $5-$10 to your bottom line, but $100 saved on expenses is $100 on your bottom line.
So some things you can check before you have your next coffee – and we’re giving you 13 tips because times are tough and it’s nice to get something extra – are:
1 Reduce debt
Take your banker to lunch and discuss what their thoughts are on achieving this. However do not reduce your total facility. You never know what’s around the corner and when you might need it for that rainy day.
2 After your banker
Call your accountant and ask them for their ideas on how you can increase your bottom line. Also ensure they have relationship with your bank and they are working together to strengthen your business not just theirs.
3 Spread your risk
Following on from point two, now is not good time to have all your debt in few baskets. Spread your debtors as much as possible, and if you must provide credit to large customer ensure your debt is protected by having an agreement, most importantly which is enforceable.
4 Be vigilant with expenses
Ask yourself if it doesn’t make dollar do I need to spend it? However don’t reduce spending on things that support your culture. We recently heard of company who removed the plants, water cooler, art and coffee machine. Not only did this send very negative message to the staff but also sent rumour the company was in trouble… number of their best people left.
5 Review all automatic payments
Has that photocopier or phone system come off lease. Put reminder in Outlook for when it does.
6 Don’t sign long-term contracts
At the moment number of costs are decreasing, especially mobile phone costs, so don’t sign new mobile phone contract for three years when with new entrants costs will continue to decrease.
7 Don’t go with single supplier for one bill
While this sounds great, most invoices are hard enough to read, so try and keep them segmented. It is also very rare that one supplier can meet all your needs.
8 Vehicle servicing
You don’t need to go through branded dealer for servicing. As long as you go to qualified mechanic and they do the scheduled service you will still be covered by the manufacturer’s warranty.
9 Set up office recycling
Remove all the rubbish bins under everyone’s desks and replace with paper-recycling bins. Then place one rubbish bin in each group or communal area. Not only will your rubbish disposal cost decrease but depending on your paper-recycling volume you may even be paid for your paper.
10 Ensure the business is producing cashflow forecasts and reporting on them
This will also ensure you focus on and understand the expenses and debtor payments within the business.
11 Wherever possible pay for outcomes not processes
Ask your IT company to give you fixed fee per month, but also ensure this is less than what you’re paying now. Same goes with your accountant.
12 Ensure good sign-off procedures are in place
Also ensure all expense line items are signed off by those that incurred the expense and there is agreement on where they are costed to. Also have two or more stage sign off where the person who incurred or requested the expense signs off on it and manager does also. Wherever possible ensure the person ultimately responsible for finance has pre-approved the expense for cashflow.
13 Review your to-do list
If you have had something on your to-do or review list and it’s been there more than month give it to someone else, because chances are it will always be on the to-do list.
Michael Masterson is the founder of expense reduction firm The Bottom Line. You can call him on 0-9-950 3883 or visit www.tbler.com
