Run Your Business Effectively: Evaluate Operating Procedures, Expenses
Managing expenses effectively is a vital part to running any business. With the new year approaching, what better way to celebrate than to make sure your business is operating as smoothly as possible.
Operating procedures are often the first thing a customer or vendor encounters when interacting with a company. As a business owner or manager, reviewing operations can improve customer relations and help contain costs.
As part of the review, operating expenses and lending relationships should also be evaluated because practices are continuously changing, and what may have worked for your company in the past may not be the best option now.
Evaluating operating procedures
Making sure that your staff members are communicating with one another sounds obvious, but it is important to check that the communication between all levels of management and employees is working well and everyone is on the same page.
Breakdowns in communication can lead to quality and customer service issues that can result in increased material and labor costs, not to mention dissatisfied customers.
Improve floor or space plan
Does your facility’s floor plan allow for efficient movement of material and employee safety? Consider utilizing Six Sigma analysis, a business management strategy originally developed by Motorola, but is now widely used in many industries. An outside consultant specializing in the field can be well worth the fee, frequently paying for themselves through the costs savings they implement.
IT systems must be in place to provide timely, accurate reporting for management to make decisions. Aging equipment can also slow down productivity and efficiency. If your budget allows, consider making new electronic purchases before the end of the year. This can be good for taxes and help get the year off to a good start. Also, moving toward a paperless office can help reduce supply and storage costs and increase productivity.
Review operating expenses
Check insurance coverage and rates
As with any type of insurance, it is important to make sure that the company is getting what it’s paying for. Review insurance policies for acceptable coverage and negotiate better rates without giving up the protection that your company needs.
Negotiate better terms on rent
With the number of vacant buildings around, landlords may be more willing to accept less to keep the building occupied and generate income. You may also find that by shopping around, you can get a larger space for less money.
Look into employee benefits
Benefits can be a significant cash expense, so make sure the benefits are adequate for the location and industry of the business. If necessary, have the employees share some of the cost.
Hire the experts
A good CPA can provide tax advice to save cash. You should consider hiring competent outside professionals because they can save you a significant amount of money in the long run.
Eliminate unnecessary costs
Labor is one of, if not the largest, cash expense item. Review job responsibilities; overtime costs may be avoided by hiring additional staff. During a particularly busy season, temporary staffing can be used to fill a need at lower wages without benefits. Outside consultants can also provide high level, expert skills without incurring salary costs.
Are your marketing dollars being spent wisely?
While it is common to cut marketing dollars to curb costs, this is a short-sighted strategy as marketing is an investment in the company’s long-term growth. Good marketing should generate qualified leads, help to develop business growth and strengthen your brand name. It should also be strategic and consistent.
Re-evaluate lending relationships
Find a lender to suit your needs
Does your lender provide support and flexibility to meet your cash needs? What worked for your business in the past may not work for your company now. You may find it more helpful to shop around with other lenders for better rates and terms — or, in some cases, other loan options, such as factoring or asset-based loans.
Review loan documents
Do you have a contract that requires you to stay in the relationship for a period of time and pay an exit fee if you leave early? If you have more than one loan with a lender, chances are the loan docs have cross default language. Cross default means a lender will tie your loans together, and it is a provision in a loan agreement or other debt obligation stating that the borrower defaults if he/she goes into default on any other obligation.
By reviewing current operating procedures and expenses, you can find ways to save money while increasing efficiency and customer satisfaction. Although you might not think your business has any inconsistencies, there are many moving parts in any organization, and it is important to revisit your current practices.
For more information about how to run your business effectively, evaluate your operating procedures, expenses and more, visit fswfunding.com.