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14 Ways to cut Fat and not Muscle from your business 1 When t imes are t ough t he knee jerk react ion of many business owners is t o sl ash t heir cost s What s wrong wit h such a st rat egy Future business growth can be compromised Marketing and Sales can suffer Good staff can be lost and new ones are costly to find and train Customer and staff morale satisfaction declines 2 On t he f l ip side when business is good owners t end t o ignore cost s and f ocus on Sal es and growt h and f igure t hat t he cost s wil l t ake care of t hemsel ves wit h a good margin What can happen wit h t hat kind of approach Net profit squeeze Cash flies out the window Overheads creep up Benefit of growth gets wasted Cash flow problems growth doesn t always cash 1 1 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
3 Cl earl y when sal es are down t here is a much great er mot ivat ion t o cont rol cost s even t hough good businesses never t ake t heir eye of f t hem So how shoul d you ident if y t he areas t hat shoul d receive at t ent ion f irst What t ool s shoul d you use Organisation Chart sets out what gets done and who does it Job descriptions in line with Organisation Chart Budget Profit and Loss Report review all direct costs and running expenses and ask yourself How can it be done more efficiently How can it be done more cost effectively Should we stop doing it Cash Flow Forecast to plot future cash position Supplier Purchases reports Use technology website CRM 1 2 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
4 Over t ime part icul arl y in boom t imes businesses get f l abby Where are we most l ikel y t o f ind inef f iciency and wast e Staff overlaps and gaps due to lack of job descriptions Premises too large or in the wrong expensive location Communications old fashioned defunct phone lines etc Banking not regularly reviewing and better deals methods sourced Use of Technology not keeping abreast of efficiency gains available Operations not regularly analysing more efficient processes Freight shop around reconsider regularity of deliveries Business Model check out modern methods and use technology to update Accounts Receivables no process and ad hoc follow ups if any Stock Management over purchasing and not shopping around for best deals constantly Job management no management or system in place to ensure quality efficiency and ability to finish jobs and invoice quickly 1 3 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
5 You of t en hear about savings being achieved by re engineering workf l ow How can you do t hat Map it out Brainstorm with key staff Do customer surveys Investigate observe others in industry Seek industry innovation ideas via associations events training etc Change Management Plan Business Improvement Lean method consultants can help Work On your business Use checklists templates to standardise operations and constantly improve creates mechanism for absorption of improvements 6 How can savings be made t o a business product s and services wit hout impact ing cust omer sat isf act ion Look for efficiencies not just savings Client and staff surveys find out what they do don t value Some savings could improve customer satisfaction Contact via electronic newsletters blogs social media Review marketing methods check out digital marketing and social media etc outsource if you aren t up to speed with it 1 4 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
7 Having ident if ied where you are going t o make your savings how shoul d you go about achieving t hem Put the customer first savings should not adversely affect them Look for efficiencies not just savings Leadership walk the talk get your team involved Start with the end in mind how do you want the business to look in future Budget Culture and communication team involvement Project put someone in charge of it and document it Implementation delegate to those involved affected Reporting look at percentages compared to budget Constant review work Celebrate When savings achieved take time to celebrate and appreciate efforts with a modest staff lunch or morning tea keep the team motivated 1 5 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
8 What are t he biggest mist akes we see business make in t rying t o achieve cost savings Approaching it in an ad hoc way Not treating it as an ongoing job Cutting the wrong costs such as marketing advertising good staff etc Not negotiating properly it s an art Creating bad will with suppliers 9 Some t hought s on downsizing and out sourcing Downsizing has to be approached on a case by case basis Businesses can become obsolete due to technology and need to be pragmatic about their future and how they will compete survive thrive Some grow too fast initially without planning and get beyond help Outsourcing is a terrific way of keeping costs down Variable costs can be only incurred when a sale is made e g subcontractors however there can be an issue with quality availability of supply Non core activities can be a good thing to outsource e g bookkeeping financial management virtual assistance virtual office space marketing human resources management debt collection etc 1 6 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
10 When do you know you have cut t oo f ar When customer satisfaction slips When staff satisfaction slips When WHS is compromised When operational issues are caused 11 Here s some exampl es of how we have hel ped some of our smal l business cl ient s t o f ind cost savings and t he resul t s t hey achieved Client in Brisbane was using debt factoring analysed situation and discovered an overdraft reduced interest by circa 30 000 Helped them put a good case to bank for overdraft budgets cash flow forecasts tidy financials Travel Agency client retail and corporate travel moved from retail shop front to cheaper location after determining most business was from corporates rather than walk ins Wholesale Baker packaging supplier got them to investigate and negotiate saved around 20 000 per annum 1 7 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
12 Is t here one t hing a business owner coul d do st raight away t o reduce t heir cost s Diarise time to look at the P L and ask How can we do this more efficiently How can we do this more cost effectively Should we stop doing this Investigate and embrace technology Be open minded about doing things differently 13 Now t here are a l ot of peopl e who say t hey provide advice on how t o manage t heir cost s How can you t el l t he dif f erence bet ween t he good bad ones Cost savings should be a whole of company effort and not just be outsourced The overall business needs to be supported The business vision and mission needs to be considered Ad hoc occasional savings can be detrimental to stakeholder experience It needs to be a constant exercise done in an organised way 1 8 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
14 Are t here ot her resources we can recommend f or t hose seeking t o manage t heir cost s Just google cost savings business there are millions of them Web sites have good advice for small business Find someone to act as a sounding board with solid commercial experience who can help you work through the process without compromising your business At CFO On Cal l we ve hel ped l ot s of businesses save make mil l ions wit hout compromising st akehol der experience When impl ement ing business changes t hey need t o be caref ul l y t hought t hrough wit h someone who s been t here bef ore It cost s not hing t o have a discussion about your opt ions Cal l us t oday on 1300 36 24 36 Aust or 0800 180 400 NZ 1 9 Copyr igh t CFOon Call com au by CAD Par t n er s Pt y Lt d www CFOonCall com au
