NFIB

Cutting Costs in a Downturn, Part I
03/ 05/ 2002

Cutting costs is important at any time, but it is especially relevant during a period of economic uncertainty. Reducing costs can have a dramatically positive impact on profitability--and can contribute to greater competitiveness and stability. The trick is to make sure that the cuts do not directly contribute to reducing incoming revenue. In today's and next week's Workshop, contributor Jeffrey Moses offers tips on tightening the belt of your business.

1. Travel Expenses Ask all employees to fill out detailed expense sheets for travel, sales meeting expenditures, company purchases and chargebacks. Gone are the days when companies give employees cart blanche on their "T & E" accounts. Meet with your accountants to determine what expenses are authorized and how much is allowed for these expenses per day, meeting or trip.

Expense sheets are meaningless unless they are reviewed by management regularly. When discrepancies are discovered, notify the employee immediately and only give one warning. Continual expensing of inappropriate items should be considered grounds for dismissal.

Putting one person in charge of making travel arrangements can also reduce costs. If employees book their own airline tickets, they may not choose to leave early in the morning or later in the evening, which is usually less expensive.

2. Phone Service Carefully review your local and long-distance telephone rates, as rates have been dropping lately. Go with a phone company that bills in six-second increments, which can save you 10 to 15% over companies that round calls up to the next minute for billing purposes. If a lot of your calls are made to in-state numbers, be sure that you compare rates carefully. Many times, intrastate rates are considerably higher than out-of-state rates.

3. Office Furniture Do not authorize the purchase of new furniture at retail stores. Instead, take advantage of companies that are downsizing and getting rid of furniture, much of which may be almost like new. Contact office supply outlets to examine pre-owned furniture, which you'll often find is entirely comparable to new, excepting a few nicks or scratches.

Bring employees on board with the idea that saving costs now can help everyone in the long run. This could encourage them to rally around your cost-cutting activities.

Next week's article continues this topic with four additional cost-cutting tips that can directly increase profitability, while not lowering revenue.

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