They say a lot of little things can make a huge impact. And relatively small expenses can add up to a huge amount of money you could be throwing away. By finding cost cutting opportunities, you can significantly impact your bottom line in several ways. Here are 10 ideas to get you started:
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. Discover 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 stocked them. Then, calculate how much revenue you would have earned by stocking the three most requested items.
3. Find ways to reduce waste. Ask your production foreman to estimate how much you spent in the last six months on lost production, manufacturing errors, injuries and re-works. Then, calculate how much extra you would have made by paying your crew a small percentage of the materials waste reduction and hourly pay required to fix mistakes.
4. Time for spring cleaning. Ask your plant foreman to give you a list of equipment that’s idle most of the time. Calculate how much you would save in insurance, carrying charges, property taxes, income taxes, maintenance and storage space by getting rid of it.
5. Make it a team effort. Ask everyone who performs day-to-day work in your business – such as delivery people, administrative assistants, customer service personnel, janitors, production employees — to write down five ways your company can become more profitable. You may be surprised by the great ideas you receive
6. Bring back 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 what’s important. 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 percent to “wowing” the top 20 percent.
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. Find expenses that are falling through the cracks. Figure out how much you spent last year for products and services that were shipped to customers but not authorized by them. 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 percent of those packages weren’t sent so they’d get to the recipients the following day.
10. Reduce overtime. Ask your payroll manager to give you a list of employees who were paid overtime last year. Initiate a bonus to departments who get their work done on time without incurring any expensive overtime.
Using these 10 ideas as a starting point, think of what you can do to start cost cutting even more.
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