Analyze expenditures and cut costs.
Want to boost your company’s profits? Start by examining your expenses.
- Maintain strategic costs and eliminate the rest – Identify expenses with the best returns, like those directly linked to product quality, excellent customer service, profitable new sales, or your defined competitive edge. These costs are considered strategic, so you’ll want to keep them, but you should cut out everything else.
- Never let expenses become routine – Take a hard look at your regular expenses. Are they essential? Can they be eliminated or pared off? If you run a large operation, target several routine expenses each month and try to find opportunities to trim them.
- Monitor travel and entertainment (T&E) expenses – T&E can soak up hard-earned revenue, so it’s important to manage costs effectively while making sure your staff follows the correct procedures for authorizing, paying, and justifying these expenses. Business credit cards [link to Truist product] offer you more control over expenses, simplifying payments and providing you with better visibility to pinpoint opportunities that save your company money.
Design a smarter budget.
Want to budget more effectively? Consider:
- Creating flexible budgets – Produce monthly budgets that can accommodate unexpected changes or opportunities. Budgets are useful when you need help making business decisions, but you should still be able to spend more—or less—than your budget allows if necessary.
- Starting budgets from zero – Instead of plugging in previous years’ figures, lead off with zero-based budgets. Start each budget from scratch for every function of your business, justifying the needs and costs for every expense. A zero-based budget ensures your company plans for essential and profitable expenses only, allowing you to thoroughly examine every line item.
- Shifting resources to areas with the greatest potential – Doesn’t it make sense to fund areas of your business that provide you with more profits? Shift your company’s resources to products and activities that are trending or promise better returns. Study changing customer needs and new technological advancements for opportunities to fund lucrative expenditures.
While it’s important to build and maintain strong relationships with your vendors and suppliers, you should always try to find a better price for your top expenses.
- Regularly request competitive bids – No-bid purchases can cost your company money. Don’t blindly accept price increases. Request bids from several vendors, including those that supply your competitors. Just mentioning that you’re considering other bids to your supplier might result in a lower price. Before accepting a bid, make sure the product or service meets your specifications.
- Benchmark your costs – Most industries have cost standards you can use to benchmark your own expenses. Industry publications and trade associations are a great resource. Depending on your business, you might want to consider using a sourcing consultant, especially if they’re paid on a performance basis from savings generated.
Controlling expenses starts with having the right systems and procedures in place.
- Require approvals – Set approval levels by expense category and individual employee. To save time, consider corporate credit cards [link to Truist product] equipped with employee-specific expense controls and reporting. Require documentation before approval. For particularly costly expenditures, consider multiple signoffs.
- Track expenses regularly – Create a flash report for a monthly, weekly, or even daily look at cash, profits, and expenditures. Ask your financial team—or for smaller businesses, your CPA—for regular statements on cash flow, profits, and costs to help manage your expenses.
- Automate expense controls – Through online banking tools, [link to Truist product] you can manage your expenses better with settings for approved expenditures, automated entitlements, and spending limits. You can also use online banking to save time and money on payroll, accounts receivable and payable, and cash-management systems.