7 Areas of Cutting Overhead Costs
Guest Blog Post By Hank Moore 1/25/12
1. Core Operations.Trim inventory. Convert to a “just in time” concept. Discard idle equipment. Re-think your production processes. Prioritize core operations to see which costs and expenses are necessary and which may be reduced or curtailed.
2. Administration. Exploit hidden assets. Rent idle space. Shrink shrinkage. Buy better. Get relief from the landlord. Cut insurance waste. Determine which assets to buy, lease or outsource.
3. Financial. Practice “zero based budgeting” each year. Enjoy every allowable tax deduction. Collect receivables more quickly. Sell receivables which are troublesome or time-intensive. Tighten credit policies, and investigate customers’ credit more closely before signing them.. Refinance bank notes. Utilize the company pension plan as an asset. Recoup pre-paid expenses. Save banking and finance charges. Reduce travel and entertainment costs.
4. Personnel, Management. Ceremonially reduce the CEO’s paycheck…to set a good example to the company. Reduce executive perks. Cut payroll costs by leasing personnel and outsourcing certain duties. Never skimp on training, since that enhances the productivity of employees. View all managers as profit centers, and make them accountable to the company.
5. Sales, Marketing. Raise prices to keep up with inflation. Practice bundle-selling. Sell an asset. Offer incentives to get advance cash from customers. Reduce advertising and marketing budgets, if they aren’t producing desired results. Joint-venture when it makes sense.
6. Studying the Company. See that savings occur in all phases and that the company operates more wholistically. Equate professional fees to an investment in company growth, not as a reward for loyal friends. Bring in consultants to recommend expense reduction and economy strategies. Realize that consultant fees are not the main problem, but budget for them wisely.
7. Company Longterm Growth. Visualize, adopt and benchmark a Strategic Plan. Without a rudder and the support by all, the organization will continue applying costly “band aid surgery.” Progress must be expected, measured and celebrated. There must exist a Big Picture.
Hank Moore, Futurist and Corporate Strategist™, is the highest level of business expert and discusses topics that one can only cover from having advised them over a long career, covered in “The Business Tree” and other best selling books.