With the new financial year upon us, there is no better time to have a look at your cost base and try to put a bit more bounce in your bottom line.
To try and find some of the less obvious cost-cutting measures, SmartCompany talked to a range of cost-cutting experts, entrepreneurs and business consultants.
Here are their suggestions – get cutting!
1 – Check your purchasing processes
Debbie Mills, managing director of Cost Reduction Analysts, says her team concentrates on cutting costs – by negotiating the best possible agreements with suppliers and by examining the purchasing processes a company uses. “The hidden things are usually in the process side of things.”
Take the stationary cupboard. Yes, you’ve got a great deal with a stationary supplier. But how are those goods ordered? Is one person in charge of the stationary cupboard, and in charge of approving every order? Or can any member of staff just log onto an online account and place an order, or go down to the shop and buy something on the account?
If the answer is the latter, you may have a problem – the staff might be getting whatever they want, whenever they want. Change your process and put one person in charge and the savings will flow.
2 – Check whether your suppliers have grown with you
Most SMEs have some great suppliers who have really helped them grow their business. But just because your supplier has been around for a long time doesn’t mean you are still getting a great deal. Michael Nicholas, director of cost cutting consultancy Expense Reduction Analysts, uses the example of a delivery or courier company. “Initially you may have engaged them to do pick-ups 9am to 4pm, but now you are doing pick-ups after hours at a much higher rate. That’s a deal you need to look at again, as your needs as a client change.”
3 – Cut your Yellow Pages and directory advertising
SmartCompany blogger and E-Team founder Craig Reardon argues that most of your prospective customers are turning away from traditional places such as the Yellow Pages and towards the web, simply because of the depth of information it can provide.
“Try gradually moving your directory expenditure into your website and online eMarketing techniques like pay-per-click and email marketing and see what results you get. It’s likely to be very positive, particularly if your business is B2B.”
4 – Buy a more expensive car (no, seriously)
Sometimes you’ve got to spend money to save money. Take the area of vehicles. Debbie Mills of Cost Reduction Analysts says spending a little bit extra to buy a fuel efficient car (such as a diesel or LPG-powered vehicle, or even a hybrid) is an investment worth making.
“You get better resale value at the end of the car’s life and you get much better running costs through the life of the vehicle.”
5 – Sack your spouse
Jason Gehrke, SmartCompany blogger and director of the consultancy Franchise Advisory Centre, says he has seen many businesses where an accountant has advised an entrepreneur to pay their spouse, partner or significant other through the business for tax reasons. “They are on the books drawing a huge wage, but they are not actually working in or adding any value to the business”. Gehrke says business owners should do what they would do for any underperforming employee and sack them. “Get your business profitable again and considering rehiring him/her. If they love you, they’ll understand you have to be cruel to be kind.”
6 – Get close to your suppliers
Everyone loves getting mates rates and while you can’t expect suppliers just to give you a discount because you are nice to deal with, there are still some very good reasons to building strong relationships. Michael Nicholas recommends asking suppliers for suggestions on ways to help each other out. For example, could ordering weekly instead of daily allow them to reduce their own administration costs and enable them to pass the savings on?
7 – Call in a negotiator
However, Michael Nicholas says companies should never allow the person in daily contact with a supplier to negotiate price. “Use the good cop/bad cop approach, calling in someone else, so that emotion is not involved in the process.” This also allows the day-to-day relationship to remain unaffected.
8 – Sell that office junk
Naomi Simson, SmartCompany blogger and founder of Red Balloon, says it’s a great idea to sell the stuff you don’t need around the office – such as old computer screens, computers or other equipment – on online auctions sites like eBay. That way you get it out of the storeroom and you might even make enough money to fund the Christmas party.
9 – Think you’ve got a good phone deal? Check again
Debbie Mills of Cost Reduction Analysts, says companies often think they’ve secured a great phone deal – you know, the one with the capped plans for the sales team, the free data for the IT guys and 10 free handsets for the executive team.
But Mills says telecommunications remain a primary source of cost savings when she looks at a company’s cost base. “The problem is these deals are very hard to analyse. Companies, just as we do personally, find it difficult to evaluate all those different offers and work out what’s best for them.”
It is crucial to understand exactly what you are getting from your contract and to check each month whether you are getting what you paid for.
Particularly look for odd looking lines in the middle of an invoice – a stray service charge or internet data fee. “Telstra are notorious for chucking in a random line,” she says.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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