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The Profit Improvement Process Part Iii

Feb 13, 2009

 

 

Analyzing General, Administrative, Sales and Marketing Expenses

The final areas to look at are the company's General, Administrative and Marketing expenses.

A line- by- line look at this area can also result in significant profit improvement opportunities. To mention a few:

  • 1. Telecommunications costs can significantly be reduced over time. These costs are competitive and should be reviewed when the contracts come up for renewal. Consolidation of carriers to improve purchasing power, taking advantage of additional no or low cost service offerings and eliminating duplication of services can all add up to substantial expense reductions.
  • 2. Insurance costs. Are limits properly set and are you partnering with your carrier for credits associated with loss prevention programs? Are you applying for applicable credits that may reduce insurance costs such as workers compensation? Have changes in your business been properly reflected in your coverage?
  • 3. Sales & Marketing expenses need to be budgeted and controlled.
    • a. Printing and other collateral materials should be put out to bid.
    • b. Have you investigated the cost per copy of a printer versus internal publication on color copiers?
    • c. Are sales commission incentives properly aligned with the company's goals? Incentives will drive behavior so it is critical to reward the right behaviors.
    • d. Evaluate the effectiveness of advertising campaigns by publication.
  • 4. Personnel costs are the result of headcount, compensation practices, and benefits.
    • a. Do you have the right number of people?
      • i. Too few results in excess over time expenses
      • ii. Too many results in unnecessary expenses
    • b. Have your personnel numbers been adjusted for changes in your business environment?
    • c. Are you in compliance with wage & hour laws?
    • d. Are independent contractors really independent contractors?
    • e. How do your people's compensation compare to others in your industry?
    • f. Is your benefits package cost effective?
      • i. Is your employee cost participation competitive?
      • ii. Are you utilizing high deductable HSA plans?
      • iii. Are you experiencing compliance issues in your 401(k) plan?
        • 1. Failing discrimination testing?
        • 2. Low employee participation rates?
  • 5. Costs of Capital include excessive interest costs, lost prompt payment discounts, and late charges. Elimination of these items can result in substantial profit improvement.
  • 6. Don't forget to evaluate travel expenses in all areas.
    • a. Are there alternatives to physically being on the road?
    • b. Are you consolidation purchasing power for hotels & autos?

Budgeting

Take these items and create a budget for variance analysis. This will allow you to identify negative trends and other problems in order to take corrective action. Identify the drivers and metrics for your business. Combing these into a dashboard will help assure profit improvement solutions remain in place.

With average experience in excess of 25 years, the CFO services partners of B2B CFO can help lead the profit improvement process in your company by helping you rationalize your business in order to achieve repeatable and sustainable profit improvement.

Contact me to find out more about the different profit improvement solutions we offer.

More from Terry J. Eve…

About the Author
Terry has over 30 years of progressive financial and operational management experience in a broad array of industries involving companies with operations ranging from start-up to in excess of $400 Million in revenues. Terry's career includes both domestic and global companies including international financial management as an expatriate on two separate continents.
View Terry’s Personal Website

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