How Do Smart Businesses Keep Expenses Under Control?
Keeping expenses under control is one of the biggest things to consider when running a business. How do you decide what should be spent to keep your business functioning at its best? What’s considered waste or excess? It’s a constant balancing act.
Reducing your expenses will have significant benefits for your business. If your gross profit margin is 20%, then every dollar saved equals five dollars in extra sales. SMART businesses know how to grow without incurring a proportional increase in expenses. So how can you apply this to your business?
The use of staff education is one of the best ways to reduce expenses. When did you last discuss the impact of expenses with your employees? Most employees think that having plenty of stock is good customer service. Most haven’t been educated about the cost of debtors. They are often surprised to learn that the cost of storing excess stock can consume up to 20% of its value. Or that up to 20% of an invoice can be lost in recovering the money.
When staff understand that margins are low, they start to play a bigger role in keeping the business healthy. Sales skills often improve, with fewer discounts given. Often there’s more up-selling of complementary or alternatives products.
Education can also turn a negative into a positive. For example, Staff rostering systems may reduce the payroll expenses by 10% by ensuring the right staff are working at the right times. Allocating expenses to cost centres with budgets, can make employees accountable for what they control, reducing expenses.
Do you have examples of training staff to be more conscious of expenses in your business and has it worked? I’d love to hear your comments.
Top 5 Tips to Manage Your Business Finances, Without Going Broke.
Do you want to learn how to read you business numbers and get you “financial” act together? Our Top 5 Tips guide will also show you the 5 essential reports every business owner needs to find the hidden profits in your business.
Amanda Dyason, Founder of ProfitSmarts
We help Australian business owners increase profits, accelerate cash flow and master their financial management. We believe life is too short and precious to be stuck in an under performing business delivering mediocre results.
ProfitSmarts gives you more Profits and consistent Cash flow, putting you back in Control. Because when you get business right, the results are simply amazing.