Expense Reduction

Expense Reduction

Reducing your expenses

Decreasing your expenses is always a profitable proposition even if you are the most thriving businessperson with an ocean of cash with you. You never know when you might have to face a rainy day. Having clear goals is your first step towards reducing your expenses. You should know precisely your targets and the direction in which your business is headed so that you can clearly chalk out your expenses reduction program. Many business owners or CEOs are not very clear about this and this is where CFO Services can actually help you.

Procedure of Expense reduction

We follow a specific procedure in devising your expense reduction strategy. The first thing that we do is to first find out the activities on which your revenue is spent and the amount that is spent on these individual activities. You spend mostly for purchasing goods and taking services. So you've got to control your expenditure on the goods that you buy. Managing these expenditures is quite a difficult task because expense reduction is not only about slashing costs, this depends on two reasons:

  • Step 1
    • The work processes which you might have to change to suit lowered costs or completely eliminate the processes if they are not all that essential but adding up to the costs.
  • Step 2
    • You might have to bargain with your suppliers for cheaper pricing to reduce the expenses. But both these processes require artfulness and expert handling so that you don't lose out on anything while implementing the changes. Particularly you should not lose out on your supplier for wanting supplies at low costs. CFO Services have the skills and knowledge to help you accomplish just this. They aid you in reducing your expenditures if they have gone beyond your control.
  • Step 3
    • In the expenses reduction program is finding out all those costs that are directly driven by the revenue and finding out their behavior if there's a change in the sales. The CFO Services specialists scrutinize these costs and activities with their sophisticated reporting tools and come up with accurate reports. They have reporting schemes which are daily, weekly or monthly. These reports allow them to compare and contrast the actual activity drivers with the planned ones. Any abnormalities due to which excess expenditure is happening are detected. This analysis and reporting process helps the experts in reaching deep into the expenditure problem and identifying the causal factors.
  • Step 4
    • The expense reduction venture is to find out the purpose for which the fixed costs are being borne. This will help in identifying the costs that are compulsory and those that are non-compulsory. The costs are categorized into three different categories:
      • Costs which can be slashed
      • Costs which are not related to your core business
      • Fixed costs evaluation on a monthly basis and either decrease or increase them for the benefit of the company.
      • The experts also show you the way you should do this to increase cash flow and improve your earnings.
  • Step 5
    • After identifying and categorizing the costs, the next step in the expense reduction program is to formulate the sales projections and make the business model for the next one or two years. The actual costs and cost drivers are tallied with those in the business model. The CFO Services is going to point out any adverse deviations beforehand and help you rectify them so that your expenses are in line with those planned in your business model.
Factors you need to pay attention to

This will also help the experts determine any breakeven factors in terms of the number of units sold, rupees spent, hours charged or a number of other applicable revenue drivers. This analysis and systematic approach helps in you having a clear picture of your sales goals on a daily, weekly, monthly or even on a yearly basis.

Win-Win situation

The CFO Services experts will give you winning strategies for building up on your infrastructure alongside your anticipated revenue increase. Buying large money for fixed assets is not a spontaneous event. This needs a lot of preparation and logical progress. Taking finances from banks should be a planned process so that you get the maximum benefit from that loan. Acquiring fixed assets should be very much aligned to your expense reduction goals.

Impacts of Purchases:

The CFO Services experts are adept at showing you just that. Before you make a fixed asset purchase the experts will analyze how it's going to impact your goals and advise you to buy them only if they think it will have a positive impact on your expense reduction goals and on your business in general. Principal and interest payments are generally not counted under expenses. Your debt costs are considered as major expenses by some companies after the products/services costs and employee payroll costs.

Disposing debt:

In case you want to get rid of your company debt as soon as possible, you can always work with the CFO Services which are going to develop a plan for you to get rid of your debt in the most convenient manner for you in the shortest time possible. They are going to tell you exactly how much money you need to set aside annually to clear your debts most effectively.

Most of the methods mentioned above might look complicated and impossible for business people. But with the reassurance of CFO Services you can always reduce your expenses to keep in line with your revenue targets.