How a company can minimize expenditure and maximize its profit?
Answers
First, you have to set goals against all expenditures aside those that are fixed. All expenses should also be within budget and should be properly monitored. A responsible officer should be held accountable for any adverse variance, in other words, managers will be appraised on revenue generation and cost control....
You also need, in addition to Duntan's suggestion is not only Ownership's buy-in, but actual participation in holding back frivious or run-a-way spending.
If you don't need the Platinum AMEX Card, don't buy it, i.e., control T & E, purchases such as computers and furniture where ego clouds the budget judgement.
1
I spent eight years working for a tiny division of a fortune 200 where cost control was the underlying theme in every budget, plan, M&A, etc. It was absolute.
I've also worked for numerous startup type concerns that have ended up being sold off or closing their doors.
For the last fifteen years I've worked in government.
There is a reason many of the fortune 200 companies have been around for more than 100 years. IMHO Duntan and Wayne hit it right on the head.
1) Communicate the organizational goals of the overall plan.
2) Obtain "buy in" by having managers create their own budgets within guidelines set by the executive staff to achieve the organizational goals and then, demand that the managers "manage" to those numbers.
3) Identify all costs as either variable or fixed. Hold the line on the fixed overhead even if you have to be hard hearted. Make the responsible managers understand that the variable costs are expected to remain proportional to sales and, if they don't, there had better be a solid explanation based on facts.
4) Provide regular variance reports internally and hold the manager's accountable for variances both unfavorable and favorable via an acceptable explanation. Connect this performance with bonuses and even continued employment when necessary.
The startups I worked for poo poo'd such ideas as allowing the "bean counters" to run things. But, these were sales companies run by sales people. Ignoring costs and throwing money at every problem worked for a while because growing sales covers many sins. But, when those sales peak, and they always do, the disconnect will become quite apparent. They are all out of business now.
Government: Forget about it. Controlling costs is blasphemy. Getting more "funding" (taxes) is the emphasis and answer to everything. Even in the Masters in Pubic Administration program I was in, the professors and the texts we used proclaimed that government was "different" and should NOT be efficient; that cost controls were for "for profit" companies. And "profit" was a dirty word. It was quite disheartening.
After you've followed the suggestions of Duntan and Wayne, address the fixed expenditures. These outlays may be contractual and often require more time to modify. Reducing fixed obligations may require changes in processes, staffing and capital investment strategies. In such cases, gaining support from and assistance of
Speaking frankly, what costs companies money is executives who haul in large pay when all the "real" work is done by someone else. If they don't perform, they bleed the company of cash in the form of golden parachutes whereas the little guy gets relatively little. Pay for performance and a strict governance model (compensation committees, etc.) can do more than all the expenditure nitpicking in the world.
Damian
What's behind your question:)
What is the company trying to do?
- staunch the bleeding after a major customer/market loss?
-invest in growing market/top line?
-something else?
That will help us with targeted suggestions for you.
Regards
Len
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Hi Len,
The company is actually experiencing high expenditure,what am looking for is the best ways, techniques and strategies we can immediately enforce to reduce and monitor these expenditure and rise Company's profit.
With Thanks
Damian.
Keep the sales people focusing on sales, make sure you collect your accounts receivable.
Identify the expenses-largest to smallest-fixed or variable, necessary or discretionary.
Where can you get the biggest reductions? Identify
Are any expenses constrained by agreements? Can you re-negotiate them? Can you ask suppliers for extended terms until you recover?
Come up with your own suggestions/analysis, then discuss with your boss. Better to bring suggestions than simply define problems.
Good luck!
in additon to past opinions my opinion it focus on the divid the expenses to kinds first ,expenses increase your revenues and secound , expenses dont increase your revenue , your work to reduce the expenses that dont increase ( generate ) revenues and increase expenses that generate revenues , while the fixd expenses try to maximam benifets from it ( you cant reduce it in short time ).
ragards
Bassim Aljeboori