They say little things mean a lot. And relatively small expenses can add up to a huge amount of money your company could be wasting over long periods.
By cutting costs, you can enhance your bottom line in several ways. Here are 10 ideas:
1. Improve cash flow. If your business is seasonal, ask your biggest vendors to let you stock up now but pay when customers buy. Also, check into renegotiating your leases to pay only those nine or 10 months out of the year when you experience the greatest number of sales.
2. Investigate new products. For the next few weeks, have your customer service personnel keep a list of products that customers would have bought from your company if you had stocked them. Then, calculate how much revenue you would have earned by stocking the three most requested items.
3. Reduce waste. Ask your production manager(s) to estimate how much you spent in the last six months on making up lost time, correcting errors, dealing with injuries and redoing existing work. Investigate as many of these incidents as possible. Identify trends, bad practices and problem employees. Address this issues fairly and methodically.
4. Do some spring cleaning. Ask your managers to give you a list of equipment that's mostly idle. Calculate how much you would save in insurance, carrying charges, property taxes, income taxes, maintenance and storage space by getting rid of it.
5. Solicit money-making ideas. Ask everyone who performs day-to-day work in your business -- including delivery people, administrative assistants, customer service personnel, janitors and other employees -- to write down five ways your company can become more profitable. You might be surprised by the great ideas you receive.
6. Renew old acquaintances. Send letters or e-mail messages to customers who discontinued doing business with your company. Thank them for their past patronage and ask them to come back. See how many call to reinstate their accounts.
7. Reassess priorities. Ask your billing department to rank your customers by the dollars they spend. Then figure out how much more money you'd make by transferring your time and money from servicing the lowest-producing 80% to "wowing" the top 20%. (You can divide up your customers other ways as well.)
8. Evaluate billing practices. If you currently bill customers a fixed amount every month, calculate how much you'd save in monthly mailing costs and increased cash flow by billing in advance every two months instead.
9. Stop expenses from falling through the cracks. Figure out how much you spent last year on products or services that were delivered to customers but not ordered. Set up a system to get customers' approval in advance and avoid this wasted expense. Then check and see how much you spent last year in overnight priority packages and shipping. Calculate how much you could have saved if just 75% of those packages weren't sent at the highest shipping rates.
10. Cut back on overtime. Ask your managers to give you a list of employees who were paid overtime last year. Look for trends and signs of excessive overtime use. Initiate a bonus to departments who get their work done on time without incurring any expensive overtime.
Think of what you can do with the savings from just these 10 ideas. Doing so should motivate you to perhaps give these a try or think of others more suitable to the size and purpose of your business. Your CPA is a great resource for assessing the true feasibility and profit potential of any bottom-line-building idea.
Get in touch today and find out how we can help you meet your objectives.
