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How To Cut And Control Expenses

Oct 30, 2009

It's clearly difficult to increase revenue today, but cutting costs can be just as, or even more effective than attempting to grow the company.  With a 10% net margin - if you can reduce costs by $10,000 - that's like increasing revenue $100,ooo.  Here are twelve ideas you can implement today..

Cut Expenses

  1. Challenge every expense - who authorized it, is it needed, can it be reduced?
  2. Assume you are spending too much - never let go of this way of thinking.  As soon as you do, expenses will start to sky-rocket.
  3. Understand cost categories: Strategic vs Non strategic - can you reduce costs without affecting your future.  Direct vs Indirect -  are costs driven by sales directly, or are they harder to pin down to specific products?  Fixed vs Variable - are costs increasing your break-even or do they vary with revenue?

Budget Expenses

  1. Take some time to really understand what you spend.  Review vendors and average monthly expenses. 
  2. Categorize and drill down on expenses.  
  3. Create a monthly budget and report against it
  4. Develop scorecards/ dashboards to maintain focus

Compare Expenses

  1. Benchmark your expenses against high performers in the industry
  2. Bid out your largest costs on a rotating basis

Control Expenses

  1. Assign an expense line to an owner.  
  2. Break costs down by department and manage against department budgets.
  3. Keep an eye on purchasing and credit cards.  Make sure charges are analyzed. 
  4. Hire a B2B CFO

As noted, it's often easier to control expenses then find new revenue. 

For more information, contact David Kirkup, B2B CFO Partner on 404 348 0326 or dkirkup@b2bcfo.com.

 

 

 

 

 

More from David Kirkup…

About the Author

David has over two and a half decades of business experience and is a proven financial management expert. Working in Europe and the USA, David has served as Divisional CFO at a number of Fortune 500 corporations: including Reuters, Marsh & McClennan, Zurich Insurance and ADP as well as numerous small and mid size companies. As part owner of a small software company, he was heavily involved in the marketing efforts and ultimate sale of the company. As CFO with a national PEO firm he dealt with the credit and financial issues facing hundreds of small business clients. David also spent 5 years in Bermuda managing captive insurance companies.

View David’s Personal Website

Books


A collection of books from B2B CFO® to help any business succeed. Read the first chapter from books, including the Wall Street Journal’s book, for free.

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