3 Ways to Cut Costs

A recent article about cost cutting and some of the reasons the process failed struck me as useless as far as providing real guidance on cutting costs. The focus seemed somewhat generic with such observations as:

  • It’s getting harder to cut costs (No kidding? Companies have already done significant trimming in response to the economy. But, how does knowing it is harder to cut costs help?)
  • It is difficulty to maintain cost cuts. (Again, no kidding? Although a few suggestions were offered, there was really nothing new that didn’t itself present something else to be maintained)

So, let’s take another look.

Is That Really Needed?

The one helpful thing this article did offer was the old idea of zero-based budgeting. This concept is designed to stop a business from simply looking at past years’ expenses and building a current year budget off of it. This avoids the tendency to just increase items in the budget by some random percentage. The idea is to build each line item in the budget from scratch. Unfortunately, unless some additional ideas are incorporated into the process, managers will often demonstrate their adeptness at simply rebuilding the status quo. I think the two primary reasons are the difficulty of recognizing what is really needed and the pain of changing.

All that said, the fundamental question that should be asked is, “Is that really needed?” This means it is necessary to closely examine positions, roles, functions, and processes to identify:

  1. Things no longer needed
  2. Things that can be consolidated as part of another role, function, department, etc.
  3. More efficient and effective ways to accomplish what is necessary

When the unneeded is weeded out and justification must be adequate to add something is required, it is easier to maintain cost cuts on a more permanent basis.

Consolidation

Item 2 above is identifying things that can be consolidated or combined with another role, functions, department, etc. For example, if your customer service function can be easily combined with an accounting role you may find you need fewer employees and at the same time improve efficiency and accuracy. Likewise, there is often an opportunity in the warehousing, shipping, and receiving areas. Who says someone cannot be cross-trained to perform duties outside of their day-to-day responsibilities? Cross-training and consolidation of roles are two of the best and quickest ways to cut costs.

Part-Time Employees

Here I’m not talking so much about someone who perhaps works an administrative or similar type role on a part-time basis, but rather more professional level roles. As a Part-time CFO I can tell you for certain that many companies simply do not need this role as a full-time one. There is often no reason for many companies, particularly smaller ones, to have this kind of expertise present every hour of every day. For more on this, see Spend Wisely – Go Part-Time and Why Hire a Virtual CFO.

Think about it and see if you can incorporate these 3 ways to cut costs.

If you want to know more, contact AimCFO – Contact

As always, your comments are welcomed.

Share

Leave a Reply

Enter your email address:

Delivered by FeedBurner