Plug those leakages to achieve cost efficiency and savings.
Cost Savings is very important for enhancing Profitability and could be achieved by plugging various leakages in your cost structure while delivering significant results to your bottom-line, without having to implement any cost reduction measures.
Ask yourself below questions to know if you are monitoring your costs well:
1. Rentals: Did you measure the office you took on rent?
Did you know that: You could have negotiated good rate per sq. feet, but what if the landlord is charging you for more area than what the actual office space is?
2. Manpower Cost: Do you evaluate various activities performed by your staff to check if there is any scope for improving efficiency, or eliminating unwanted tasks or automating mechanical processes?
Did you know that: By undertaking Time & Motion study, by evaluating in detail what each one does the whole day, by implementing certain productivity tools and/or by realigning job responsibilities, you could improve employee productivity multi-folds, thereby eliminating the need to hire more and containing manpower costs? Such measures also help in improving accuracy levels.
3. Cafeteria Services: Have you ever compared your guest/employee attendance vs. the plate count provided by your cafeteria services provider?
Did you know that: While you may have negotiated best per plate rate with your cafeteria services provider, you may be charged for unwanted extra plates?
4. Internet Cost: Are you paying for internet for allowing free movie downloads to your employees during office hours?
Did you know that: With smart internet usage policy, where you could permit personal use of internet after office hours, you could free up a lot of internet traffic, thereby reducing internet bandwidth requirement and corresponding cost.
5. Car Hire / Conveyance Cost: A lot of employee friendly companies provide door-to-door transportation services to their employees. Are you checking if the car hire company is taking the best route from “distance travelled” perspective OR is he charging you based on the longest route?
Did you know that: There have also been instances of employees producing fake/manipulated bills for car fuel / conveyance cost. Thorough cross checking, strong expense approval process and strict disciplinary action reduces this substantially.
6. Business Development Costs: How do you know that the Restaurant/Entertainment bills that Business Head just produced are not for his family outing?
Did you know that: There could be leakages in costs and sometimes unwanted costs are incurred if Sales & Business Development teams are not monitored closely and vouchers not checked thoroughly? Companies have implemented simple control measures like asking for the restaurant bill and not just the credit card statement to check the number of guests entertained AND checking if those expenses were incurred on a working day or a holiday.
7. Telephone Costs: Do you monitor long distance calls made by employees through the company phone number? Do you monitor roaming call costs?
Did you know that: By giving a Calling Card and by monitoring key long distance phone numbers, you could reduce your telephone cost substantially? This also reduces personal calls being charged to company account.
8. Lawyers Bill: Do you ask for cost estimate from your lawyer, before asking him to work on any matter?
Did you know that: Most lawyers work on time & effort basis? They would charge you even for the telephone call you had with them explaining the matter on hand, as well as for correcting the mistakes made in the first draft document prepared by them. You may have negotiated hourly rates, but always ask them to stick within a budget and minutely review their time sheets to check what you are being billed for.
9. Banking: Do you have a separate working capital (overdraft) account and a separate current account? Are you efficiently moving money across your various non-interest bearing current bank accounts to your interest bearing Working Capital (OD) account?
Did you know that: By setting-up auto sweep or other manual methods, and ensuring that funds from your current account are moved to your Overdraft (OD) account on daily basis, you could save a lot of interest cost in your OD account?
10. Interest Cost: Are you monitoring the interest rate charged by your bank on the loan you took from them some time back OR do you just pay whatever the bank charges you as interest?
Did you know that: You could miss out on interest cost savings just because your bank did not reduce the interest rate on your loan, while lending rates would have reduced?
Did you know that: If you have been servicing your loan well, and if you feel you are being charged higher interest rate, as compared to what another bank is offering, you could go back and renegotiate your interest rates with your bank? Remember, banks too need good clients.