Doing nothing is costing you money – The cost of complacency
5 ways to reduce overheads without breaking a sweat.
Cost management is becoming increasingly important as local and global competitive pressures create new challenges for businesses to grow. Most managers look at mechanisms to increase revenue but often forget that efficient product or service delivery improves profitability and allows for scaling up during growth.
Budget and baseline
Review your financial statements. Identify significant (or insignificant) cost items and assess their contribution to your organisational success. This may sound simple, but by asking the basic question of ‘could this be reduced?’ or ‘am I paying too much for this?’ can spark a meaningful top down review of cost items that can be eliminated.
Expense items should be baselined annually, compared to your peers and measured against
revenue performance on a semi regular basis to manage cost growth.
Health check on utilities
Utilities are a significant contributor to business costs and often a cost base that goes unaudited. It is important that businesses check their electricity, telecommunications and other utilities against market prices regularly and not just at contract expiry. The market for these services is dynamic, with constantly changing offerings that can be explored using fee free advisory services.
Furthermore, utility providers often become complacent about their margins and are not held to account – ensure you deal with a knowledgeable provider to tender your utility costs and ensure you’re getting the best rates.
Assess your workforce profile
In most businesses people are the most expensive resource, and for good reason. They are the lifeblood of the organisation and permeate your culture and your mission. Employee growth is generally paired with growth in sales and correlates with increased profitability. However it is important for your workforce to evolve with your company as efficiently as possible. As companies grow, there is a tendency for the workforce to become bloated. This generally goes unaddressed whilst revenues are growing. It’s important that even whilst revenue grows businesses ensure
they’re getting the most from staff and that the appropriate company functions are established.
Understand the productivity of your staff. You can do this by taking note of major work functions ensuring role mandates are in place and removing waste or non-value add tasks from staff doing high value roles. A common example to articulate this scenario is businesses which have sales staff performing large amounts of admin work in managing customer relationships. Sales staff should be out talking to customers and making the most of their skills, not tied down in an office filling in forms. Ensure people are enabled to perform the tasks you want them to do.
Outsource non-core functions
Outsourcing can unlock capacity in your organisation and is a well-known mechanism for reducing cost and improving efficiency. There are a number of ways for businesses to augment their workforce using outsourcing. This may include shifting non-core functions such as bookkeeping or data entry, right through to executing strategies for lead generation and marketing. Outsourcing doesn’t need to be wholesale teams in an offshore delivery hub, it can be as small as a one or two person team delivering a mix of essential business processes.
Many businesses don’t realise that outsourcing isn’t just set and forget. Many businesses should strive for ongoing cost savings from their outsourced work as processes become more streamlined, efficient or fully automated.
Measure returns on marketing
Marketing is a business essential expense that requires regular review. Marketing and advertising expense should be providing a return well above the cost of that marketing. The mix of marketing activities will determine this return. Businesses can review the cost of marketing with the objective of maximising ROI – the return on investment. Set hurdles, ensuring that each marketing strategy is assessed against others, in particular the channels used and the consumer response to each channel. Invest in those that will grow your revenue at the lowest cost and abandon those which do not contribute to revenue or the betterment of the organisation.
At Global Enablement, we specialise in reducing costs in your business. Contact us today for a no obligation consultation on how you can benefit from a business audit.
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