You've Slashed Expenses - But Have You Really Looked EVERYWHERE?

Wednesday, August 18, 2010

In this new economy, it’s trim now or lose out. Only businesses that are lean, mean, and razor-sharp will rise to the top or even survive to play another day.

Most likely, you’ve cut many of your expenses, reorganized, and looked for any and all areas to save money in your organization. Even so, according to Mark Neilson, Managing Partner of Tatum San Diego, it’s a safe bet that you’ve merely picked the low hanging fruit—and have still “left money on the table”.

How much revenue does it take to earn another $250,000?
Did you know that a $250,000 savings for a company with a 5% pre-tax profit margin is like adding $5,000,000 in new revenues?

Assuming you’d rather add $5M to your top line than not, here are 7  “no brainer” areas to assess for potential savings:

1. Perform a Thorough Tax Review
   We’re not talking about reviewing tax returns. We’re asking, have you really shared every piece of critical information with your CPA? Have you taken advantage of every tax credit available to your business? More than 15% of all businesses don’t equip their CPAs with all the information needed to reduce tax burdens as much as possible.
2. Audit Benefits Eligibility
   Who is receiving benefits on the company’s dime? Chances are not everyone who is receiving benefits is eligible. Indeed, between 5-12% of company benefit recipients are ineligible.
   
   A Concord, CA educational company did just that in 2009: Remarkably, they were able to reduce benefits obligations by over 10%--just by eliminating recipients who were never terminated when they should have been.
   
   Have your benefits broker perform an audit to find out who should have been asked to leave the island a long time ago.
3. Review Costs of Maintaining Legacy Technology
   Very few businesses have highly efficient technology infrastructures. It’s costly—but did you know that IT departments spend over 70% of their time maintaining legacy equipment? Just think how much money you could save by investing in some new equipment, and/or by outsourcing maintenance contracts. You might also consider a lease model in which you’re regularly rotating in new equipment for much less than the payments on a purchase.
4. Assess Energy Usage
   Most utility companies will perform a free energy use assessment for the entire organization so you can find out if you’re sucking more power than you need to be. San Diego’s SDG&E tells us the majority of customers don’t take advantage of this free service—but when they do they can save thousands. Be one of the smart few and call your utility today and ask them to come out and assess your use.
5. Revisit Office Space Lease Agreements
   Even if your lease doesn’t renew for a few more years, there’s no reason not to explore existing opportunities.  With the real estate market at an all-time low, you have a window of opportunity to get into a higher class office space or to renegotiate your existing lease. The right opportunity could justify breaking your lease. The market is rough for landlords. Use it to your advantage!
6. Check into Telecom Contracts
   Unless you periodically review and revise your Telecom agreements and services, you most likely are  missing out on cost savings related to switching or upgrading plans. In fact, a recent customer of MyOffice thought they were in great shape with their system purchased in 2007. Turns out by changing NOTHING other than their services contract, they reduced costs by 15%.
   
   Technology changes so quickly that before you know it, what you need is the cheaper option, not the more expensive one—but your telecom provider certainly won’t volunteer that unless you ask!
7. Shipping & Transportation
   If it moves, there’s a cost. And if there’s a cost, there’s a chance for savings. Your bulk shipping and regular transportation needs give brokers a reason to vie for the business. Now is the time to secure the best pricing out there. Call shipping companies like FedEx and UPS directly and also call a broker or two. See where you can get the best deal. They want your business—trust us.

How much will you save?

It’s impossible to know how much you will save because every organization is different. At the very least, you will know you thoroughly assessed every possibility for cost-cutting. You simply cannot lose by reviewing these areas—you can only lose by ignoring them.