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How to cut your costs

A cost cutting clock

 

 

 

 

 

 

 

Almost every business goes through the annual ritual of budgeting for, or forecasting, its sales and expenses over the next year. Unfortunately this ritual often misses a golden opportunity. Used properly, budgets are not only useful for monitoring performance, they can actually help to reduce costs.

It is important to be clear on one thing, though. A budget that merely takes last year’s figures, and adds a percentage for inflation will not help to reduce costs. The only way that budgeting will reduce costs is if every cost has to be justified from first principles before it is allowed to be included in the budget.

What do we mean by “first principles”?

You and your team will have to answer the following questions about every single element of your business’s cost base:

Can it be eliminated without significantly damaging the business’s profitability?
Is it over-specified for the needs of the business and could the specification be trimmed to save costs? i.e. are you using a Rolls Royce when a Mini Metro will do?
Does it cost more than the benefit it delivers? 
Can the same outcome be achieved more cheaply in some other way, perhaps by changing company procedures or by installing a new computer etc?  
Can it be done more cheaply by an outside sub-contractor?  
Is there a way of paying for it in kind rather than in cash?  
Can it be done less frequently without harming the business?  
How do other businesses achieve the same outcome?  
If you were to start in business again, would you still decide to incur this type of cost?  
Is there any duplication of effort, and can the task be combined into one already carried out elsewhere in the business?  
Is somebody responsible for the cost? How do they go about discharging that responsibility?  
When was the last time competitive price quotes were obtained? Has the choice of supplier become a matter of habit and convenience rather than sound economic sense?

Although these questions should be asked about all of your costs, it probably makes sense to concentrate initially on your largest costs. After all, the larger the costs, the larger the potential savings.

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The Top 10 Reasons Why Small Businesses Fail

1. Lack of management systems – systems are the key to creating a business that works… without you having to be there. This in turn will allow you to work ‘on’ the business, increase the value of your business, ensure your customers get a consistent level of service and motivate your people.

2. Lack of vision and purpose by principals – ‘where is the business heading?’

3. Lack of financial planning and review – it is essential to have access to regular management information and hold regular board meetings.

4. Over-dependence on specific individuals in the business – develop your business around ‘functions’, not ‘people’. If specific individuals are vital to your business, ensure that you have key man insurance in place.

5. Poor market segmentation and strategy – Do you know who you want to market to (type of customer) and, how you want to portray your business in the marketplace (e.g. the cheapest or a premium product/service)?

6. Lack of knowledge about the market and competition – Do you undertake market research and competitor analysis? For example, chocolates used to be a popular gift, but they are now being replaced by wine, flowers and gift vouchers.

7. Failure to establish or communicate company goals – communication is one of the keys to motivating your people.

8. Absence of a standardised quality program

9. Inadequate capitalisation or lack of funds – Cash flow is all-important for a business. Many profitable businesses fail due to lack of cash.

10. Owners concentrating on the technical, rather than strategic, work at hand – are you running a business, or are you self-employed?

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Helping you and the less fortunate… for free

Buy1GIVE1 - Transaction Based Giving

 

 

 

Helping you and the less fortunate… for free

As Accountants Changing the World we also believe that as human beings we all have a responsibility to give back to help and empower those less fortunate than ourselves

So we will give any business in our area a free social responsibility review.

The aim of this is to help you create a direct link between what you do and your giving, so that the process of giving to your chosen good causes becomes embedded in what you do as an integral part of who you are and what you stand for.

As the result the business will have even more purpose and energy by being connected at a deeper level than ever before with the things it believes in.

You can keep track of our giving and view our company profile at B1G1 here.

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Helping you and the environment… for free

Making your business better for you and the environment

 

 

 

 

 

 

 

 

Helping you and the environment… for free

As Accountants Changing the World, we believe that the current generation has a responsibility to future generations to ensure that the environment is not ruined.

So we will give any business in our area a free sustainability audit designed to both identify what they can do to reduce their carbon footprint and create an action plan to actually make it happen.

If you would like us to do this for your business, then please contact us today on 01237 421342.

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Helping you and the economy… for free

Improving your profit

Free benchmarking review

 

 

 

 

 

 

 

 

 

Helping you and the economy… for free

As Accountants Changing the World, we believe that the accounting profession has a responsibility to help you develop a sustainable competitive advantage so that you can enjoy more income and wealth, have a better work-life balance and generate more prosperity and jobs for the wider economy.

So we will give any business in our area a free profit improvement review. And, subject to the information being available, this will often also include:

  • Researching how your business compares to others in your industry;
  • Identifying where the evidence suggests you are strong or weak compared to your competitors;
  • Calculating how much the evidence suggests your sales, profits and cash-flow could be improved;
  • Presenting our findings in a Plain English report; and,
  • Helping you to use those findings to draw up an improvement action plan.

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Accountants Changing the World

Accountancy Edge is one of the 25 founder members.

 

 

 

 

 

We are proud to be able to officially call ourselves Accountants Changing the World.

You can find full details here www.accountantschangingtheworld.com.

But, in simple terms, what that means is that we have signed a formal public commitment document to give businesses like yours free professional support and advice that will help you to…

Change your world for the better

As Accountants Changing the World we will help you develop a sustainable competitive advantage so that you can enjoy more income and wealth, and generate more prosperity and jobs.

Change the wider world for the better

We will also help you to make a lasting difference to both the environment and to those who are less fortunate in life.

And you will get all of that help from us free of charge.

You can read the full text of the commitment document we have signed at www.accountantschangingtheworld.com

Over the next few posts we’ll outline how we’ll help your business for free.

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