ForumsAccounting and Budgeting

My three main tools for reducing business expenses are planning, flexibility, and renegotiating.

Travel is a big part of my business, so advanced planning and purchasing on airline reservations can really save a lot (as opposed to booking trips at the last minute). At the same time, being flexible about where I stay can also provide big savings (for example, I book hotels in advance to ensure I have a room, but I also keep checking on-line deals and am willing to cancel my reservation and stay elsewhere if I find a better price on-line the day before. I also try to renegotiate things whenever I can -- health care premiums, web hosting fees, telecommunication services, building services contracts (security, custodial, pest control, etc.). Renegotiating doesn't necessarily result in a cost reduction, but it can head off a price increase for awhile since I make a good customer (long history of paying on time and never complaining unless there is a serious and legitimate problem).

That, too, is probably a key for keeping our costs down -- we pay on time (avoiding late fees, interest charges, and price increases from suppliers). I guess that's really more of a cost avoidance than a cost reduction, but it helps us get the credit we need to take advantage of good deals like large quantity purchases on supplies or raw materials -- and that can help reduce costs.

Good question -- hope the discussion continues from here . . .

Hi,

Great topic you've started! Since I own my trading operation from just few months I haven't, yet, developed much cost-reducing practices.
1) Since I am a retailer I save any boxes left from products I have recently sold (since I put them together into PC's my clients don't need the boxes) and leave them on my shelf with prices on them. When a client is interested they order it (deliveries in my case are on 12hour basis) instead of buying it. So far it sounds dull, but this way I have much more products to expose to my clients and I have more free capitals to work with. When boxes get outdated I collect them for recycle. With the money I cut off my monthly expenses on electrical power.
2) Every effective office has a lot of tech in it. Cut electricity consumption with energy-efficient light bulbs and Class A (most energy-efficient class for electrical appliance by EU standards) products too.
3) A lot of paper goes around for making offers, so to cut down on A4 paper expenses I reuse/recycle most of the paper that is left in the office.
4) To keep myself organized I buy a lot of sticky notes, but I realized that having an "organizer" book can make things much more simpler and organized. Each new page is for the current day and so on. A simple notebook can do it. Near my place there is a "1 dollar shop" where I buy notebooks for cents. It costs 4-5 times less than a pack of sticky notes and has 5 times bigger capacity.

Hope this helps!

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Great topic, especially in today's tough business environment.

Reducing costs in the wrong place can often cause more problems that it solves! Try looking at some of these suggestions.

1. Rather than beating suppliers for deeper discounts (you become a less attractive customer and may get poorer service) ask them for quicker delivery Just-In-Time for the next job. This reduces inventory and reduces your cash-to-cash cycle (the time between when you pay for the inventory and when you get paid).

2. Look at your estimate & job costing. How accurate is it? Can you recover the cost of poor estimates from the customer without creating an environment of lost trust? People are willing to pay (just making up numbers here) $100 if they know it will be $100. If the estimate is $75, they see a $100 invoice as being "ripped off" even if it was an honest mistake. This can cause "bad press" when their friends ask for recommendations.

3. Remember, the old formula of "cost + margin = price" does NOT work anymore. To a large extent the "walmartization" of the economy makes people shop around more. Your "price" will be driven by the marketplace. Quality is still important, but customers assume quality within a given price range and tend to go for the lower priced product/service within their affordable range.

4. Look at overhead expenses. Since these are "fixed" in your budget, every dollar you save goes right to the bottom line.

Hope this helps.

I have taken my staffing and now have everyone on a part time basis. I found people who only want part time and can adjust my scheduling to meet production needs. My order input person works from their home and I pay her per each order put in. That way I am only paying for the actual work, not the downtime.

When I need items for the shop, I seriously consider used and try to make do with what I got. A lot of times we can work what we have or modify it instead of buying new.

Jim

What are people doing to save money.
Today's Sunday New York Times, Business Section
"When the economy is falling down all around you, it is only natural
to protect yourself with some austerity measures"
"STOP EATING OUT. The average restaurant meal costs three times
as much as one cooked at home".
LUCKIEST

Good question Painter,

My business partner has finally got me doing a few web based meetings. It is not the same interaction as meeting clients in person, so I generally do web meetings for follow ups with sales reps or reinforcement sessions, but if I am training new reps then I deal with the fuel expenses and meet face to face.

My partner and I have also decided to reduce our personal profit sharing this year by 50% but our employees will remain untouched. The good news is that we are still on point for growth this year, but the bad news is that the economic outlook for 2009 doesn't look much better than 2008, so we are doing what smart squirrels do, we are stockpiling our acorns (cash) for when we may need them (slow down in business). We all know consultants are usually an expense that gets cut first.