Controlling Expenses In Your Business Improves The Bottom Line
By Michael Laleye
The report card for any business is its profit and loss statement and in order for the business to succeed, profit is determined by two categories, income and expenses. As all business owners know it is easier to adjust expenses than it is to increase income but for profits to show a significant rise, income should go up while expenses go down. Some businesses make the mistake when they are reducing their expenses of eliminating costs in some of the wrong areas.
Typically, one of the biggest items on any business's expense sheet it payroll, often times making up 60 percent or more of the business's expense line. Many businesses will automatically reduce their payroll expense when they have to increase the profit line. This may be a short-term solution but it can cause long-term ramifications. When a business has to layoff employees due to the lack of business, the employee suffers personally and the business suffers because the remaining employees have to pick up the slack.
Cutting an employee's pay typically is never discussed, as this will not only ruin relations with that employee it can affect the morale of everyone else on staff. Businesses are advised that while it may provide the quickest reduction in expenses, cutting payroll should only be the last resort. There are going to be several line items in the controllable expanse account that can trim some debits off the account before sending people home.
Consider utility costs, for example, as electricity and natural gas prices have risen significantly over the past few years. Even if you do not have the money to go out and buy energy saving light bulbs and appliances provided in the business, there are some ways to trim a few cents a day off the utility cost. If you have unused areas in your facility, only provide enough heat to protect anything in the room and then close it down. Make sure all the lights are turned off in every unused room and keep watch for light bulb sizes that can drink electricity like water, which are not necessary.
Maintaining your facility for the comfort of yourself, your employees and customers if applicable, can help improve morale and the customer experience, but if you are closed at night, turn the thermostat down. If you can find it in your budget, buy and install a computer operated thermostat and set it to a lower temperature when no one will be in the building and turn it back up before opening the next day. Use the same common sense with the air conditioning. Use it when it is needed, but turn it off when it is not.
Your business rent is probably a fixed amount with little room for improvement, but utilities can save a little and office equipment and supplies can eat up cash that you might be able to use to avoid layoffs. Ordering from a catalog and having all your stuff delivered to the door may be convenient, but it also going to be expensive.
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