Keeping track of your business expenditure is as easy as ABC
One of the key concerns of any business will be to ensure that it is managing its expenses closely. Does every business owner fully understand the complex issues of managing the costs of essential business services? These key operational overheads include premises related costs, utilities, telecommunications, information technology, waste management and finance (including insurance and bank borrowings), and there are some organisational steps that you can implement immediately to better manage your associated outgoings.
Firstly, ensure that someone within the business is responsible for the management of overhead costs. Make sure that your business is financially sound and that you are up-to-date with your financial reporting. Check your credit rating – suppliers will be checking yours and adapting their pricing strategy accordingly.
A simple acronym – ABC (Awareness,Benchmarking, Consistency) – provides a basic guide to managing and reducing business costs:
Profit-leaks directly impact on every aspect of business development by draining resources away from growth and income generating investment. Create a cost conscious culture as an important business objective for everybody in your organisation.
There are two aspects to this – understanding the prices and looking at the consumption and items being purchased. Make sure that you thoroughly check every invoice to ensure that it is correct and that you are being charged according to your agreed terms or price list. Encourage your staff to think about the expenses they incur and how resources are used.
Carry out a benchmarking exercise to establish exactly what you are paying for your essential services and what other suppliers are offering. Now go back to all your current suppliers and ask for their best price. If you have been with them for a few years, the chances are you are not being given the best available terms. If they will not budge on price, see if they can throw in some ‘extras’ in relation to service. If your insurance is arranged by a broker, do not assume that they always find you the best premium available, so shop around with several brokers.
The key to maintaining best value purchasing is to be consistent. Effective management of costs and purchase management is not a ‘one-hit wonder’ – it needs to be a continuous activity. Markets change all the time, as do the needs of your business.
The article “Watching the Pennies” was first published in Teach Nursery Magazine