Expense Management - The Other White Meat

Typically, one of the biggest items on any business expense sheet is payroll

, often times making up 60 percent or more of the business expense line.

Many businesses will automatically reduce their payroll expense when they have to increase the profit line. This may be a short term solution but it can cause long term ramifications. When a business has to lay-off employees due to the lack of business, the employee suffers personally and the business suffers because the remaining employees have to pick up the slack.

Cutting an employees pay typically is never discussed, as this will not only ruin relations with that employee it can affect the morale of everyone else on staff. Businesses are advised that while it may provide the quickest reduction in expenses, cutting payroll should only be the last resort.

There are going to be several line items in the controllable expanse account that can trim some debits off the account before sending people home.

Consider utility costs, for example, as electricity and natural gas prices have raised significantly over the past few years. Even if you do not have the money to go out and buy energy there are some ways to trim a few expenses off utility costs. If you have unused areas in your facility, only provide enough heat to protect anything in the room and then close it down.

Make sure all the lights are turned off in every unused room and keep watch for light bulb sizes that can drink electricity like water which are not necessary. Install and use sensors for light, heat, and cooling wherever possible! These items pay for themselves in just a few months time.

Do You Have a Competitive Advantage on Cost Control?

Specifically, are your company's Expense Management Skills and Business Ideas working to implement strategic plans that your competitors cannot implement as effectively? At Applied Business Consulting our Cost Consultants understand that your competitive advantage is critical.

It is the reason you are in business. It is what you do best that draws customers to buy your products and services instead of your competitor's. Extremely successful companies deliberately make choices to be unique and different in their cost control planning and they focus portions of their energy in Expense Management.

In the past, your business lease/rent was a fixed amount with little room for improvement, but this has changed significantly. Leases can and are being renegotiated. This expense reduction is particularly effective with leases set to expire within 3 years.

Owners and Property Managers have a fear of you leaving due to a lack of financial cooperation in this economy. Another savings avenue is in utilities. They can save a considerable amount and office equipment/supplies can also eat up cash that you might be able to use to avoid layoffs.

by: Tom Mann

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