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  • Cameron Finlay

Review Business Expenses Now!

New financial year! There might be a recession, or at least tough times! So, now is a great time to review business expenses; what you save will probably go straight to the bottom line.

Prudent expense management helps ensure that valuable cash resources are used wisely. And sometimes, a business may NEED TO reduce expenses as a matter of survival. No matter what the circumstances, here are some Best Practices for reviewing and managing expenses.

1. Look first at non-core functions

When cost-cutting, focus FIRST on activities that do NOT directly generate a profit, that is, the non-core functions.

The core functions of your business drive revenue and profit, help you to differentiate yourself in the market, and usually involve interaction with your customers. These core activities could be inefficient … but look first at the support (or non-core) functions including finance, legal, administration, the office, human resources, data processing, supply-chain management, and logistics.

2. Look for redundant activities

Every activity or initiative in a business has a lifespan. That means even a really beneficial activity will eventually become inefficient or redundant. Expense reviews are an opportunity to look for redundant positions or processes that can be eliminated or restructured.

3. Look into the future

When considering cost-cutting options, think longer term than just the immediate savings. If something is going to be discontinued in the future anyway, maybe now is a good time to bring it to an early close. For example, no point in continuing to invest in your office, training programs, or IT systems if these are to be discontinued down the line.

4. Be transparent with employees

Payroll may be the subject of cost-cutting. It’s likely your employees have a good idea of what is going on and an honest presentation of the facts will bring the best results for the organization. Set reasonable expectations about the future to build a track record and trust.

5. Keep up some marketing presence

How the market perceives your situation is important. Completely ‘falling off the radar’ may raise questions among prospects, clients, and referral partners. Maintaining a presence, for example, in social media is an inexpensive way to ‘be seen’ in the market.

6. Nothing is too small…

All of those ‘minor expenses’ add up. Don’t ignore office supplies, snacks, furniture, and that fancy coffee machine.

7. Stop autopay

Sounds simple… but most businesses are paying for things without properly scrutinizing whether they are adding value. Autopay makes this scrutiny even harder … and delays the cancellation of underutilized subscriptions.

8. Renegotiate outdated contracts

Look especially at suppliers with whom you have a long-term relationship. It may be time to revisit the pricing and terms of payment. Sometimes just asking the question about costs will trigger your suppliers to offer a better deal.

And maybe you’re paying for things you don’t need, like mobile phones assigned to ex-employees or seldom-used printers or copiers.

Keep a record of all long-term contracts and set alerts so you can revisit these several months ahead of expiration. Then negotiate, instead of simply letting the contract renew with the original terms.

Most businesses benefit from a review of their overheads or fixed costs. If you could save 6% to 10% of those overheads (academic studies showed this was possible) this increases the profit and cash for you.

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