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MONEY SAVER
Taking Stock
December is a good time to reflect on the company’s operating costs for the past year.
Although your company year-end may not coincide with the calendar year-end, comparing your financial results to date with budget estimates at this time of the year can help you determine if business expenses are in line as well as highlight areas that need attention. Doing this review now may help you find incentives for making cost-saving changes for the new year.
Communications While communications are the backbone of business, the costs can creep higher and higher as technology provides more and more options. Perhaps it is time to take a serious look at the actual services and time used for your Internet, cell phone, and landline communications. Is usage greater than anticipated when you signed up? Is the business paying for blocks of time that are not being used? If you purchase blocks of time, would it be more cost-effective to pay-as-you-go? Alternatively, would blocks of time be a better deal? If your cell phone usage seems high, have you considered pagers? If your costs for any of these communications have increased, is there a package deal that would better meet the needs of your business?
Interest Look at the company’s interest costs. When these costs are appropriately allocated in your financial reporting system, you can determine the sources and make adjustments. If, for example, most of the interest expense comes from carrying balances on credit cards, are the cards being used to finance operations? Consider using a line of credit, which can be obtained at a lower interest rate, and pay the credit card balances in full each month.
Vehicles Review the owned or leased company vehicles. Are there vehicle leases to be renewed? Should you buy-out the lease, renegotiate, or change leasing companies? If the company uses luxury cars, would more economical models serve just as well? Are some leased vehicles no longer needed? This review can help you revisit your vehicles usage. Reducing the fleet or stepping down a model or two will also reduce your car insurance premiums.
Travel Review travel expenses in view of the amount of business the travel brought in. If travel expenses are creeping up, it may be time to adjust, or set out, caps for accommodation and meals or to contact hotel and motel chains to find better corporate rates. Consider incentives to reduce expenses, such as avoiding higher-priced departure dates for air travel. The airline’s discount for a weekend stay can be significantly more than the costs of staying an additional day or two. Are travel itineraries planned well in advance so that regional customers can be visited in the same swing to reduce travel time and costs?
Labour Are employees cross-trained to ensure you have back-up staffing when you need to cover absences for illness or holidays and ensure continuity when an employee leaves? Review your past expenses for temporary and seasonal staffing in view of your staffing requirements for the coming year. Will any employees be retiring in the coming year? Will those positions be replaced or can the functions be assigned to other employees? Can annual vacations be co-ordinated early in the new year so that you can better determine staffing needs for the coming months?
Contracts Review contracts with specialists, contract workers, commission sales representatives, maintenance services and transportation companies before renewing them. Look at the original terms of reference, duration and other clauses in view of the company’s needs today. It may be time to cancel or renegotiate, to look for a new provider or to bring a full-time employee on board.
Office Office expenses can get out of hand if no one takes the time to review recurring costs such as subscriptions or software updates in view of the company’s changing needs. If you are leasing equipment, determine if it would now be more cost-effective to purchase new or used equipment.
Be sure to review your computer system security and disaster recovery plan. These should be updated to reflect any changes in processes and program versions. Have there been any incidents where employees have not adhered to the company’s policies for backing up critical data and programs? Do these policies need to be reviewed and updated to protect the company from data and financial losses? Are there new programs or technologies available that could help streamline processes, automate functions or improve security?
Track and Control Taking the time to review your operating costs now will alert you to potential problem areas that need to be addressed. Your chartered accountant can help you track, control and more effectively manage your expenses so you can improve the bottom line.
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