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90 Ideas to cut Costs and Increase Cash Flow
Excerpted from the book
All About Earnings: 100 Ways to
Profit in Any Economy by Barry Schimel and Gary Kravitz
When cash gets tight and you need to cut costs or find ways to increase
cash flow always remember that your fellow Vistage group members offer a
wealth of good ideas to get your company back on track. Here’s a list of
other ideas to supplement what your group might recommend:
Cost
Cutting Measures
1.
Eliminate excess and/or duplicate association dues and publication
subscriptions.
2.
Sub-lease unused office space.
3.
Renegotiate your lease by asking for downward rental adjustments.
4.
Cut down
on entertainment expenses. For example, have meetings in the office
rather than at a restaurant.
5.
Take
advantage of local seminars to reduce travel expenses.
6.
Examine
your telecom bill for billing errors.
7.
Negotiate special terms and prices with suppliers to accommodate your
cash flow requirements.
8.
Sell
idle assets.
9.
If you
do not receive significant price reductions for bulk purchases, order
inventory on an as-needed basis.
10.
Send a .pdf
by email instead using a messenger or delivery service.
11.
Turn off
lights when not in use.
12.
Set back
air conditioning and heating at night.
13.
Use
two-sided copies instead of single-sided copies.
14.
Pay
bills when due, not before.
15.
Check
postage scales for accuracy -- 9 pennies should show a weight of one
ounce.
Taxes
16.
If you
paid income taxes in prior years, remember that current year losses can
be carried back three years to generate tax refunds.
17.
If your
income has decreased significantly from last year, check with your CPA
to avoid over-paying estimated corporate taxes.
18.
Meet
with your CPA before your fiscal year end to consider tax planning
opportunities.
Track
and Measure
19.
Develop
key ratios and key performance indicators for your business. Monitor
them on a periodic basis. (Gross profit percent.; GP/SALES; inventory
turnover, SALES/AVG INV; accounts receivable turnover, SALES/AVG AR;
average collection period, AR/AVG DAILY CREDIT SALES; collection
effectiveness rate, CR/BEG AR.)
20.
Develop
flash reports of critical financial items and monitor them weekly.
21.
Identify
profit centers by analyzing monthly financial statements; consider
closing down unprofitable areas.
22.
Set up
and/or monitor departmental budgets.
23.
For at
least several months, sign all checks for expenses and eliminate
unnecessary items.
Collections
24.
Send
pre-addressed return envelopes with bills. In some cases this will
expedite customer payments.
25.
Closely
monitor individual customer accounts’ receivable balances. Contact
customers immediately when their average collection period increases.
26.
Save
significant collection fees by using a dunning service before sending
bad debts to a collection agency.
27.
Use a
collection agency or hire a collection manager to accelerate
collections.
Insurance and Benefits
28.
Consult
your life insurance agent for ways to reduce costs of life, disability
and health insurance.
29.
Consult
your casualty insurance agent to reduce costs of all other insurance.
30.
Consider
using non-cash bonuses such as stock options, ESOPs, etc, as employee
compensation.
31.
Make use
of tax advantaged "cash or deferred" fringes (cafeteria plan) to reduce
payroll costs.
Credit
and Billing Management
32.
Tighten
credit policies for all customers.
33.
Take
advantage of purchase discounts, even if borrowing is necessary. For
example, "2 percent/10" terms will save you 36 percent over 360 days.
34.
Check
references before extending credit to a new customer.
35.
Be
certain that customers understand your credit terms.
36.
Request
customers to pay by invoice rather than by statement.
37.
Consider
sending out semi-monthly statements.
38.
Charge
customers interest on delinquent accounts.
39.
Settle
customer billing disputes promptly.
Banking
40.
Prepare
monthly cash flow analysis to determine cash needs before borrowed funds
are required.
41.
Secure
two lines of credit at different banks, before you need the funds. Be
sure to shop for rate and pay back arrangements.
42.
Set up
an alternative financing arrangement.
43.
Don't
surprise your bankers -- keep them informed in good times and bad. Send
them copies of your interim financial statements.
44.
Take
advantage of interest bearing-checking accounts.
45.
If no
other sources of financing are available, borrow against the
cash-surrender values of life insurance policies.
46.
Consider
the use of outside investors to raise needed capital.
47.
Consolidate loans to obtain a lower interest rate.
48.
Look for
ways to secure your personal assets. Do not sign for business debts
personally, and never permit your spouse to sign on the obligation.
49.
Shop
banks for the best credit card processing fees and interest rates.
50.
Make
deposits daily to accelerate cash inflow.
51.
Use
extra cash to reduce debt.
52.
Draw on
your line of credit and place proceeds in a savings account at another
bank. Otherwise, the bank may cancel your line of credit if you don't
use it.
53.
Consider
using a lockbox system at your bank to accelerate cash inflow. Caution:
instruct the bank to contact you before depositing any checks marked
"Payment in Full."
54.
Keep
investments liquid to accommodate short-term cash needs.
Equipment and Vehicles
55.
When
it’s necessary to purchase equipment, use trade industry surveys that
rate the equipment's performance.
56.
Cancel
insurance on vehicles and equipment that are not in use. Remember: some
states require surrendering license plates when insurance is cancelled
on automobiles.
57.
Consider
leasing equipment and real estate rather than purchasing.
58.
Negotiate equipment lease terms to be paid during peak business cycles.
59.
Discourage personal use of company autos.
Vendors
60.
Prepare
comparative analysis of competitors' pricing.
61.
Comparative-shop for supply prices.
62.
Get bids
on all any major expenditures.
Human
Resource
63.
Set up
an employee incentive program to generate cost-reduction ideas.
64.
Eliminate employee theft by implementing adequate internal controls.
65.
Reduce
your compensation to the level necessary to cover your living expenses.
This shows your sincerity in tackling cash-flow problems.
66.
Decide
if bonuses are justified. (Bonuses should be determined by profit or
performance, and not time of year.)
67.
Limit
expense authorization to upper management.
68.
Put a
freeze on hiring and salary increases.
69.
Use
independent contractors instead of employees when possible.
70.
Consider
using part-time employees. This reduces the amount of benefit payments.
71.
Utilize
an administrative or part-time employee instead of a messenger service.
72.
Eliminate all overtime hours unless prior approval has been obtained.
73.
Ask
managers for written plans on eliminating unnecessary expenses in their
departments and other departments.
74.
Discuss
economic issues with staff to help motivate them to do a better job for
your clients, customers and business.
75.
Set up a
committee to create new cost-cutting measures and enforce existing
measures.
76.
Consider
reducing employees' hours rather than eliminating positions. For
example, go to a six-hour day rather than an eight-hour day.
77.
Prepare
a procedures manual to scale down training costs and make job
transitions less costly.
78.
Reduce
unnecessary meetings; use an agenda to make meetings more efficient;
table non-agenda items; set a time limit on meetings.
79.
Cross-train staff to perform multiple functions, and combine job duties
where possible.
80.
Look
closely at employees to determine their productivity. Non-productive
employees should be terminated and replaced with productive personnel.
81.
Be alert
to the increased number of job-seekers. Be selective and choose the best
employees now.
82.
Send one
person to a particular course (i.e. software training course) and make
that person a resource to others on that subject.
83.
Consider
using an automated payroll service to reduce in-house costs.
Marketing Resources
84.
Understand and promote what separates you from your competition. Let
staff and customers know what you do best!
85.
Evaluate
the pricing of your goods and services and analyze for sensitivity to
increases or decreases in prices.
86.
Consider
adjusting hours of operation to meet customer demand.
87.
Investigate related products and services to identify emerging markets.
88.
Monitor
the competition and related fields for their responses to the economy.
89.
Have
company owners and upper management call on customers personally to
identify their needs (products, services, or economic).
90.
Bundle
products or services and offer them at attractive prices to stimulate
sales.
Barry
Schimel C.P.A. is president of BizActions LLC, a “best in class”
provider of e-Newsletter solutions and e-marketing applications,
enabling organizations to send customized and targeted communications
that enhance client relationships, retain business and generate warm
leads. BizActions offers sponsors cost-effective opportunities to
produce professionally written, timely and consistent business and tax
articles and customized newsletters.
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