Incurring expenses is usually the focus of many business owners. Ordinarily because it's the easiest and most illustrated thing to look at. However, there are other considerations for controlling costs. The first one is to look at how you conduct the flow of money overall. By this I mean your budgets.
I want to reiterate that if you spend the time upfront defining your budgets, then it's a lot easier to conduct the costs that are incurred down the track. It also allows you to then delegate the management of this process to the bookkeeper or financial controller.
Air Travel Card
1) Top Tip: Implement A principles That You Only Pay On buy Orders
One of the most effective ways to operate costs is once you have your allocation defined, is to then implement a principles where you Only pay invoices on buy orders. This will stop employees ordering willy nilly in its tracks. Because as soon as you issue the edict to staff, you make sure that the accounts citizen Only pay where a buy order is quoted.
For staff to spend money, this means that they have to invite a buy order from the accounts person. They would then check the allocation to make sure that the number is allocated, and that the man ordering the goods is authorized to make the order. If the riposte is yes to both of these, then the accounts man would issue a buy order which the man ordering the goods when then quote.
So when the invoice is received by the accounts person, they would then check that the goods have been delivered and that there is no superior issues to resolve. They would then prepare a cheque or online transaction for payment.
If there is no buy order assigned, then they would refer it back to the provider and/or the staff member who ordered the goods to resolve. I recommend being tough here - if its not assigned, then you don't pay. It's then up to the worker to determine the catalogue - well essentially you probably would, but when there's a perceived consequence, it usually puts the fear of god into them! They usually don't spend your money again after that scare!
2) Value For Money
One of the areas that most business owners are usually fairly comfortable with is controlling costs. But let's just go over the basics again. As a business owner, you should set a key doing indicator for your financial controller to be responsible for value for money. This means continually finding for separate and innovative ways to operate costs as a way of impacting your business' profitability. A dollar saved as a cost, goes directly to lowest line profitability. Some businesses find that by implementing tight cost controls and questioning the need for all spending has achieved the same profitability correction that would otherwise have had to come from a huge growth in sales.
Now I'm about to briefly go through a checklist that is available in the 'Essential Financial management Templates' workbook which you can buy from our website.
3) Shop nearby For Deals
The first rule of thumb is to shop around. No matter who I'm dealing with, whether it's a good friend or colleague that's providing the service, I always compare it against two other quotes. Now, I usually don't go level for the cheapest option, but it does allow me to then go back to the traditional man and have an open and honest seminar about reducing the traditional cost. I always think about a comment one Nasa astronaut once made when being asked about his feelings about being in space on a new space shuttle for the first time. His reply was, "how would you feel if you were about to fly in craft millions of mils into space, where your shuttle safety is wholly reliant on our governments procedure of sourcing the cheapest part possible." Point well taken. It's not always about going for the cheapest option, but it is about ensuring that you're getting value for money.
4) compare Actual Costs To Your Budgeted Costs
Another point is to always present costs on an ongoing basis. I would recommend monthly - lets not wait until the end of the year or when we're in strife, we should always be focused on ensuring that we're getting value for money at all times. When you are going through your reports with your financial controller, use this as a time to look over your costs and compare them to your budgets.
5) Think outside The Box To reconsider Other Options
Also be sure that you're aware of what's happening in the shop place. Is there a new player who can supply contentious prices, or is there an online option available to you. Possibly even a global possibility for you to explore. I'll give you the example of a website. I had a friend who rung me to ask my concept about a quote she had received on building a website. The quote was for ,000. I referred her to a website called elance.com that has a global online bidding community. She located a project brief for man to build her a website and ended up getting one built for 00. She was delighted with the potential and the end succeed - the only thing she did say was that she had to spend more time communicating with them (as they were overseas) but she was happy to do that to save herself ,600!
6) Continually present Your standard Providers For The Best Prices
Are there areas in your price items that are being deregulated or additional players coming into the market. For example, electricity or gas providers, telephone providers, etc. You may be able to save money by consolidating accounts on your mobile phone bills. There are also telco providers that admittedly supply a free estimate service to see where they can save costs for you - use them!
7) present Electricity Costs With An energy Audit
And while we're on electricity costs, have you conducted an energy audit in your business to ensure that you're not needlessly wasting money? For example, some energy reduction strategies could contain turning off lights in offices that are not being used, or turning off the air condi8tioning system, photocopiers, printers and computers at the end of the day. Is there the possible to use electricity in "off peak" periods. Put timers on plant and tool and put signs nearby your business reminding citizen to turnoff the lights and to save energy.
8) Reign In The stationery Bills!
One of the biggest price items in a business can be stationery. A lot of business owners won't pay a delivery payment to their business, but they will send an office man to pick up the stationery, at -30 an hour, plus allow them to buy "whatever they need". Have you ever tried not to buy an impulse item at a stationery store? It's impossible - take it from man who knows! Look also at the purchases that are being made in small quantities - can money be saved by purchasing in bulk - especially in printing. Make sure that one man only has the accountability of purchasing stationery and ordering printing so that its not open slather of everyone in the business and they can also make sure that the items are admittedly required.
9) produce A tour Policy
Do you have a tour procedure in your business? If so, it should clearly frame the class of air travel, grade of hotel accommodation and what expenses can be incurred and reimbursed. There are numerous accommodation site available now days that allow last tiny bookings at a greatly reduced cost - have a look at wotif.com to see what I mean. Using this site means that you can admittedly book staff into 5 star accommodation at 3 star prices.
10) Check Bank Charges & Fees
Also reconsider bank interest, fees and charges - these should be checked usually as banks often make mistakes in charging fees and interest. You should also enounce a article to interest rates and margins quoted by banks and shop nearby for the best interest rates.
11) present car Allowances
Vehicle allowances are also an additional one area of costs that can rack up pretty fast when employees cotton to the fact that they can receive a nice tiny earner using the Ato car reduction figures. If you have citizen using their vehicles a lot, you may want to reconsider whether you buy or hire a pool car. Often the number of money that you can spend paying car allowances can admittedly pay off a business car - therefore building your assets at the same time. an additional one way to hand this is to offer to pay for all petrol costs instead. So all an worker fills up, they just need to hand you the receipt and they'll be reimbursed in full. This still adds up cheaper than paying a car reduction - and is easier to allocation for in your behalf and loss projections.
Another way to additional streamline this process can be to have fuel cards that link into a particular catalogue that you pay each month.
12) produce Boundaries For worker price Reimbursements
Always produce the boundaries for price reimbursements in your business. Concentrate this into your induction agenda in your business so that everyone is highly clear of the expectations. This is particularly relevant if you have a business improvement man who wants to have an "entertaining" budget. I usually empower citizen in this regard by providing them with a profitability target on sales made - which incorporates things like their entertainment budget. But more often, I'll act6ually sit with them and run through ways to supply possible clients with value, without expenses "wining and dining" experiences. In fact, in my It days, where everyone apart from me had a corporate reputation card for "smoozing". I was more effective with my sales because I would take citizen for a coffee.
13) Make Sure The Invoices You Pay Are Correct
Advertising is an additional one area where businesses can incur lots of charges. I've covered off on advertising in an additional one Cd in the Jump Start Your business Series, but one thing I want to mention here is taking care with "bogus" invoices for advertising and checking that all invoices are admittedly for valid advertising. Now if you have a buy order principles or a centralized purchasing process, then you won't get caught out on this one. But a few years back there was a scam where citizen were receiving invoices for "advertising" and then pressuring the accounts payable staff to pay them. A nice tiny earner made from the lack of internal systems in 99% of companies.
14) Beware Of Overcharging!
I want to cease by talking about overcharging and the need to always check invoices against contracts or agreements. This includes rental agreements, any provider invoices, etc. If in doubt, don't be shy of request the provider to supply more details or query any inconsistencies. Errors are admittedly made and usually suppliers are highly apologetic should a incompatibility be discovered.
15) Ensure That Your Petty Cash Has A Monthly Limit
Despite your best planning, there will be cases when you need to have entrance to some petty cash - that is small amounts of cash for purchases that are fairly minor and random.
Make sure that the introductory petty cash number is realistic - if it keeps exceeding the number each month, you need to produce where the cash is being spent and then put alternative strategies in place. However, I would strongly recommend setting a monthly limit that staff are aware of - for instance set a monthly number of 0. Once it's exceeded, it's exceeded.
Taking time to reassess your costs will have a direct impact on your lowest line. However, be just that you don't focus more on cost minimization than opportunity creation. It's easy to cut costs, but downright difficult to originate more income. So be sure that your attentiveness is focused in the right direction.
12 Ways to control Costs in Your companyIncurring expenses is usually the focus of many business owners. Ordinarily because it's the easiest and most illustrated thing to look at. However, there are other considerations for controlling costs. The first one is to look at how you conduct the flow of money overall. By this I mean your budgets.
I want to reiterate that if you spend the time upfront defining your budgets, then it's a lot easier to conduct the costs that are incurred down the track. It also allows you to then delegate the management of this process to the bookkeeper or financial controller.
Air Travel Card
1) Top Tip: Implement A principles That You Only Pay On buy Orders
One of the most effective ways to operate costs is once you have your allocation defined, is to then implement a principles where you Only pay invoices on buy orders. This will stop employees ordering willy nilly in its tracks. Because as soon as you issue the edict to staff, you make sure that the accounts citizen Only pay where a buy order is quoted.
For staff to spend money, this means that they have to invite a buy order from the accounts person. They would then check the allocation to make sure that the number is allocated, and that the man ordering the goods is authorized to make the order. If the riposte is yes to both of these, then the accounts man would issue a buy order which the man ordering the goods when then quote.
So when the invoice is received by the accounts person, they would then check that the goods have been delivered and that there is no superior issues to resolve. They would then prepare a cheque or online transaction for payment.
If there is no buy order assigned, then they would refer it back to the provider and/or the staff member who ordered the goods to resolve. I recommend being tough here - if its not assigned, then you don't pay. It's then up to the worker to determine the catalogue - well essentially you probably would, but when there's a perceived consequence, it usually puts the fear of god into them! They usually don't spend your money again after that scare!
2) Value For Money
One of the areas that most business owners are usually fairly comfortable with is controlling costs. But let's just go over the basics again. As a business owner, you should set a key doing indicator for your financial controller to be responsible for value for money. This means continually finding for separate and innovative ways to operate costs as a way of impacting your business' profitability. A dollar saved as a cost, goes directly to lowest line profitability. Some businesses find that by implementing tight cost controls and questioning the need for all spending has achieved the same profitability correction that would otherwise have had to come from a huge growth in sales.
Now I'm about to briefly go through a checklist that is available in the 'Essential Financial management Templates' workbook which you can buy from our website.
3) Shop nearby For Deals
The first rule of thumb is to shop around. No matter who I'm dealing with, whether it's a good friend or colleague that's providing the service, I always compare it against two other quotes. Now, I usually don't go level for the cheapest option, but it does allow me to then go back to the traditional man and have an open and honest seminar about reducing the traditional cost. I always think about a comment one Nasa astronaut once made when being asked about his feelings about being in space on a new space shuttle for the first time. His reply was, "how would you feel if you were about to fly in craft millions of mils into space, where your shuttle safety is wholly reliant on our governments procedure of sourcing the cheapest part possible." Point well taken. It's not always about going for the cheapest option, but it is about ensuring that you're getting value for money.
4) compare Actual Costs To Your Budgeted Costs
Another point is to always present costs on an ongoing basis. I would recommend monthly - lets not wait until the end of the year or when we're in strife, we should always be focused on ensuring that we're getting value for money at all times. When you are going through your reports with your financial controller, use this as a time to look over your costs and compare them to your budgets.
5) Think outside The Box To reconsider Other Options
Also be sure that you're aware of what's happening in the shop place. Is there a new player who can supply contentious prices, or is there an online option available to you. Possibly even a global possibility for you to explore. I'll give you the example of a website. I had a friend who rung me to ask my concept about a quote she had received on building a website. The quote was for ,000. I referred her to a website called elance.com that has a global online bidding community. She located a project brief for man to build her a website and ended up getting one built for 00. She was delighted with the potential and the end succeed - the only thing she did say was that she had to spend more time communicating with them (as they were overseas) but she was happy to do that to save herself ,600!
6) Continually present Your standard Providers For The Best Prices
Are there areas in your price items that are being deregulated or additional players coming into the market. For example, electricity or gas providers, telephone providers, etc. You may be able to save money by consolidating accounts on your mobile phone bills. There are also telco providers that admittedly supply a free estimate service to see where they can save costs for you - use them!
7) present Electricity Costs With An energy Audit
And while we're on electricity costs, have you conducted an energy audit in your business to ensure that you're not needlessly wasting money? For example, some energy reduction strategies could contain turning off lights in offices that are not being used, or turning off the air condi8tioning system, photocopiers, printers and computers at the end of the day. Is there the possible to use electricity in "off peak" periods. Put timers on plant and tool and put signs nearby your business reminding citizen to turnoff the lights and to save energy.
8) Reign In The stationery Bills!
One of the biggest price items in a business can be stationery. A lot of business owners won't pay a delivery payment to their business, but they will send an office man to pick up the stationery, at -30 an hour, plus allow them to buy "whatever they need". Have you ever tried not to buy an impulse item at a stationery store? It's impossible - take it from man who knows! Look also at the purchases that are being made in small quantities - can money be saved by purchasing in bulk - especially in printing. Make sure that one man only has the accountability of purchasing stationery and ordering printing so that its not open slather of everyone in the business and they can also make sure that the items are admittedly required.
9) produce A tour Policy
Do you have a tour procedure in your business? If so, it should clearly frame the class of air travel, grade of hotel accommodation and what expenses can be incurred and reimbursed. There are numerous accommodation site available now days that allow last tiny bookings at a greatly reduced cost - have a look at wotif.com to see what I mean. Using this site means that you can admittedly book staff into 5 star accommodation at 3 star prices.
10) Check Bank Charges & Fees
Also reconsider bank interest, fees and charges - these should be checked usually as banks often make mistakes in charging fees and interest. You should also enounce a article to interest rates and margins quoted by banks and shop nearby for the best interest rates.
11) present car Allowances
Vehicle allowances are also an additional one area of costs that can rack up pretty fast when employees cotton to the fact that they can receive a nice tiny earner using the Ato car reduction figures. If you have citizen using their vehicles a lot, you may want to reconsider whether you buy or hire a pool car. Often the number of money that you can spend paying car allowances can admittedly pay off a business car - therefore building your assets at the same time. an additional one way to hand this is to offer to pay for all petrol costs instead. So all an worker fills up, they just need to hand you the receipt and they'll be reimbursed in full. This still adds up cheaper than paying a car reduction - and is easier to allocation for in your behalf and loss projections.
Another way to additional streamline this process can be to have fuel cards that link into a particular catalogue that you pay each month.
12) produce Boundaries For worker price Reimbursements
Always produce the boundaries for price reimbursements in your business. Concentrate this into your induction agenda in your business so that everyone is highly clear of the expectations. This is particularly relevant if you have a business improvement man who wants to have an "entertaining" budget. I usually empower citizen in this regard by providing them with a profitability target on sales made - which incorporates things like their entertainment budget. But more often, I'll act6ually sit with them and run through ways to supply possible clients with value, without expenses "wining and dining" experiences. In fact, in my It days, where everyone apart from me had a corporate reputation card for "smoozing". I was more effective with my sales because I would take citizen for a coffee.
13) Make Sure The Invoices You Pay Are Correct
Advertising is an additional one area where businesses can incur lots of charges. I've covered off on advertising in an additional one Cd in the Jump Start Your business Series, but one thing I want to mention here is taking care with "bogus" invoices for advertising and checking that all invoices are admittedly for valid advertising. Now if you have a buy order principles or a centralized purchasing process, then you won't get caught out on this one. But a few years back there was a scam where citizen were receiving invoices for "advertising" and then pressuring the accounts payable staff to pay them. A nice tiny earner made from the lack of internal systems in 99% of companies.
14) Beware Of Overcharging!
I want to cease by talking about overcharging and the need to always check invoices against contracts or agreements. This includes rental agreements, any provider invoices, etc. If in doubt, don't be shy of request the provider to supply more details or query any inconsistencies. Errors are admittedly made and usually suppliers are highly apologetic should a incompatibility be discovered.
15) Ensure That Your Petty Cash Has A Monthly Limit
Despite your best planning, there will be cases when you need to have entrance to some petty cash - that is small amounts of cash for purchases that are fairly minor and random.
Make sure that the introductory petty cash number is realistic - if it keeps exceeding the number each month, you need to produce where the cash is being spent and then put alternative strategies in place. However, I would strongly recommend setting a monthly limit that staff are aware of - for instance set a monthly number of 0. Once it's exceeded, it's exceeded.
Taking time to reassess your costs will have a direct impact on your lowest line. However, be just that you don't focus more on cost minimization than opportunity creation. It's easy to cut costs, but downright difficult to originate more income. So be sure that your attentiveness is focused in the right direction.
12 Ways to control Costs in Your company
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