Controlling and Reducing Expenses
Controlling and Reducing Expenses-now even more important!
Earning money is hard work, but keeping that money in your pocket is even harder these days. Expenses are a part of life, but learning to control or even reduce them could save your business. Consider these tips:
Start with your important and difficult expenses. These typically include wages and payroll taxes, direct cost of goods, rent, health insurance, interest of long-term loans, etc. For these expenses you could consider a team approach and assign benchmarks over a 3-month period to evaluate progress. For every expense, you should rank them according to potential savings and tackle them in that order. For instance, shop your merchant services (customer payment processing).
Move on to your important and less difficult expenses. Consider outsourced services, insurances, telephone, auto repair, utilities, interest on short term loans, finance charges and late fees, etc. Utilize the same approach, ranking them by potential savings and tackling one per month. For example, if you could save money on interest for a credit card, try to pay that off or transfer the balance to another card that is less expensive.
Next, address less important and less difficult expenses. Items like administrative or general overhead expenses, meals & entertainment, office supplies, etc…are expenses that can usually be better managed. Pay close attention to purchases and what you have on hand. You should create a culture of cost consciousness which means everyone should be aware of what they are spending and questioning if they really need something.
Finally, focus on your less important and difficult costs. Contracted costs, emergency and/or unpredictable items can be delayed until they become a higher priority or are up for contract renewal.
Waste and inefficiency can spiral into disaster. Click here to download our Controlling/Reducing Expenses worksheet.