Ways To Cut Costs


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A turnover of $5 million for a small business could be great. But I am still in a mess. I just don’t understand where the problem is. I have earned enough to sustain for at least 6 months, but then why am I not able to pay the salaries on time. The cost seems to be high on the priority list while taking up any decision.

Well, if that’s the situation your company is facing, then probably even you are a victim of high-cost operability. At the outset, all seems perfect. Company’s image is improving, client base is expanding, and work is increasing yet there is a continual crunch. A dire need of ready cash! The payments seem to evaporate the minute they reach. There are no reserves.

These all are symptoms of bad cash management. The costs are not aligned for the long-term benefits of the firm; rather they are spent on need basis. Various firms tend to ignore the importance of cutting costs, especially when the revenues are at a high. Rather the growing phase is a time period when cutting cost is a must.

How to Cut Costs? There are various ways to culminating cost while at the same time maintaining quality, of which few important ones are elaborated:

1. At the production front by:

  • Saving the electricity expenses e. g. switch off the machinery during lunch or tea breaks.
  • Monitor production closely to avoid any cost incurred in idle employee time.
  • Impart adequate training to reduce pilferage.
  • Bulk production.

    2. At the purchase front by:

  • Bulk purchase.
  • Check the consignment carefully to avoid any defected items or products.
  • Shop carefully for the best vendor and price.
  • Pay bills only on due date to have ready cash for other disposals.
  • Keep a strict account of allocated purchases to various departments.

    3. At the employee front by:

  • Reducing the recruitment cost – hire through referrals.
  • Monitor by way of time sheets.
  • Engage temporary or contractual cost to tap this cost stream.
  • Engage cheaper resources for basic tasks, like college interns for research.
  • Look out for multi- utility resources.

    4. At the administrative front by:

  • Monitor stationery expenses – advocate a paper free office.
  • Monitor employee calling to reduce expenses.
  • Make expense sheets to keep an account.

    5. Outsource the activities you do not specialize in to reduce the associated operational cost.

    6. Lease out various resources. Anything form office space to furniture, from employees to professional advice can now be leased out.

    7. Study various credit sources for payment terms and interests to subscribe to the cheapest possible.

    8. Raise invoices on time and try getting paid earlier, even if that entails giving special discounts or offers. Another mode to get some easy cash is by selling out your due bills. Though the overall amount is less than the bill amount, yet cash is received at an earlier date than otherwise due.

    There are many online firms are ready to offer you professional consultancy regarding cost cutting.

    Alexander Gordon is a writer for http://www.smallbusinessconsulting.com - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.

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