Over the years, we have helped many companies grow profitably, using
simple, common-sense tactics for cost savings that go directly to your
bottom line! And it’s the little things that count - a ten percent
increase in profit is more likely to come from twenty things that
contribute one-half percent each than from one thing that gives you the
full 10 percent.
Here are 16 tips to help you cut accounting and administration costs.
1. Improve Collections. This tip comes from my partner (both life and
business) Phyllis. Rather than wait for a bill to be past due, call the customer
the day before the payment is due to be certain they received your invoice and
that it is scheduled for payment. If they haven’t received it, tell the you will
fax it to them immediately. This trick alone is how she has improved collections
from 120+ days past due to 45 days (94% current) at a major importer.
And deposit daily! Take advantage of the short-term interest on your
deposits.
2. International Payments. While it takes an average of 42 days to
collect payment from U.S. companies, it is much slower in other countries. The
average days outstanding on receivables in other countries: Iran 310; Syria 175;
Kenya 143; Ethiopia 138; Argentina 121; Uruguay 120; Tunisia 116; Chile 109;
Ecuador 107; Cameroon 106; Morocco 105; Algeria 103. So, if you do business
there, you better adjust your prices to reflect these slow collections.
3. Accounts Payable. With each vendor, work out an agreement to delay
payments or spread them out. A long payout over one year can be secured by a
note and will reduce your accounts payable on your balance sheet (it goes under
long-term obligations). This improves your working capital position, which makes
your lenders or investors happy.
4. Improve Cash Flow. By improving cash collections and delaying cash
payouts you have improved cash collections. Let’s look at an example. Assume
your sales are $3 million and you have 120 days in accounts receivable, or
$986,301. Improve it to 45 days and you reduce it to $369,863, which is a cash
flow improvement of $616,438. If you delay payments to vendors to 45 days
instead of 30, you could improve cash flow another $123,287 on payables of $1
million. That means you have improved cash by $739,726!
And, if you still need to improve cash, consider factoring your receivables,
which is very common in the fashion industry. If you sell to customers who have
good credit, you borrow against the receivables or sell them outright.
5. Save Pennies. Reduce costs wherever you can. With a business, you
have five major areas of costs: 1) Labor; 2) Rent; 3) Inventory; 4) Equipment;
5) Marketing. Save on the operation costs like rent and equipment, and you have
more to spend on the things that make you money – inventory and marketing.
Before you spend a lot of money on fancy offices, fixtures or state-of-the
art technology, consider other, less expensive ways. Fixed expenses don’t make
you money!
6. Reduce Cost Of Your Office Supplies. Go through your past invoices
and highlight the office supplies that make up 80% of total dollars spent. You
should focus on only the top 20%--those items you always need to have on hand.
Then, contact three vendors and get bids on those specific items. Let them know
you're shopping for the best deal. If you include a superstore (i.e., Staples,
Office Max, Office Depot) in your survey, account for the costs of an employee's
time to get the supplies.
Compare prices with online or mail-order companies. Ask questions: What is
the minimum order allowed? Who pay the freight charges? Do they have an 800
number to place orders? Who pays the return freight if there are problems?
Centralize the purchase and location of office supplies to improve inventory
control and reduce redundant purchases. Work with your supplier to develop
"just in time" inventories where the supplier manages the inventory and restocks
as needed. Often, orders can be delivered within a day.
7. Telephone Control. Make sure you are getting six-second increment
billing with no minimum per call. Some long-distance carriers will charge you a
full minute even if your call is only 18 seconds in duration. The shorter your
average call, the more you'll save by having six-second billing. With voice mail
and faxes being so common, the average call is getting much shorter. Studies
have shown that six-second billing can save you around 10 percent on your
long-distance bill. Competition with telecoms is becoming fierce. Some are now
using the mobile telephone billing concept - flat fee for "x" minutes anywhere.
If you have more than a dozen telephone lines, you may be able to save money
going to a system that uses trunk lines and shares them among different
facilities. Rather than pay separate charges on each telephone line, this allows
you cut line charges.
8. Your 800 Number. Consider a toll-free telephone number for customer
service or to tie locations together seamlessly. For example, let's say you are
a software company with sales in one location, support in another and
administrative in a third. Rather than give customers three different telephone
numbers, give them an 800 number, which offers a menu for them to select and
redirect the call. When we first implemented such a system, we learned the
differences in costs were quite significant.
When negotiating for an 800 number, a critical question you must ask is
whether or not you "own" your 800 number. In May '93, the U.S. FCC enacted a
regulation allowing the customer to keep the same 800 number when switching to
another long-distance company ("portability"). If you move, your number goes
with you. The telephone sales rep should ask you to sign a "Resp Org"
(Responsible Organization) form, that is required to be submitted, turning the
management of your 800 number within the 800 database entity over to a
long-distance company.
