Welcome to week 9 of the 2020 #BusinessChallenge!
Last week we started with our theme Cost-Cutting and I showed you that the exercise is so much more than just cutting costs.
So last week I asked that you open up your financials, or you could have used your management accounts, and highlight the areas where you think you can save costs. This should have left your statements with colourful lines allover.
The reason I say this, is that you can cut costs on every single line item of expense. There is no area where you are not able to do this. If you only highlighted a few items, please go back and start over. You can cut each one!
So what are the next steps?
Start with your expense items. If you sell goods and have a Cost of Sales line item, skip that section for now. Only focus on the overhead expenses until you are in the swing of things.
Give yourself time to focus on just one line item per week or month, however, you wish. The reason you do not focus on many at the same time is to ensure that you can really dig deep and understand why you have this overhead cost item and then focus all your energy on reducing it as much as possible.
Let’s use an example
As an example, I will use a specific client’s process we followed with their cellphone expenditure.
Our client spent an average of R40,000 per month on its cellphone contracts and usage with 2 service providers.
We decided to pull the detailed statements of account from the service providers and inspect each contract, phone and its usage. From this inspection, we determined that the company was paying for 2 contracts which it no longer used, nor did they even know where the phones were.
Now, this might seem ridiculous to you, but these kinds of things happen in every single business in the world. We become so entangled with our daily tasks and routines that we miss these small things in the business.
The first thing we did was to contact both service providers and get an exact apples-for-apples quote, whether we could save some money. This made us realise that the company could save money by consolidating all the contracts to one service provider.
Secondly, we analysed the airtime and data usage for each contract. We then set up each contract with the service provider in such a way that we reduced the costs of each contract but had sufficient airtime and data for the employee.
We enrolled the client onto the service providers online platform and the contracts are now managed weekly to ensure that each employee has sufficient airtime and data. On this platform, we can also ensure that we do not overspend for unused airtime and data.
What should I do further
With this exercise of inspecting each line item, you should also get updated quotes on a regular basis. Repeat this exercise at least once a year.
Make sure that at any given time, there is no other option available to you whereby you can save money and improve your productivity.