10 Ways to Increase Your Profitability

10 Ways to Increase Your Profitability

“Profitability is as dependent on cutting costs as it is on increasing sales.”

Profitability is as dependent on cutting costs at it is on increasing sales. As financial advisors, we are often called upon to assist management in reducing costs and finding alternatives to their unique situations. We have outlined below ten areas that all business owners should examine when attempting to implement cost-cutting strategies.

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Outline

These are the 10 Ways to Increase Your Profitability

• Check Payroll Costs
• New Perspective on Fringe Benefits
• Utility Review
• Overnight Mail & 1st Class Delivery
• Company Owned Vehicles
• Automate
• Outsource Your Headaches
• Vendor Contracts
• Budget & Plan
• Attitudes & Employee Inclusion

Check Payroll Costs

Payroll represents the lion’s share of most firms’ controllable costs. Although it has received bad press in the past, employee leasing deserves your careful review. Also, examine whether any employees can be classified as subcontractors; or consider the use of part-time or temporary employees. Finally, consider whether automation can help reduce your payroll.

New Perspective on Fringe Benefits

Share the cost. Fringe benefits can now approach 40-50% of your payroll. Especially in the area of health care insurance, consider installing a “Cafeteria Plan” and begin sharing future premium increases with your employees. Because all insurance programs are very competitive, make sure you solicit bids.

Utility Review

Cost-conscious employers always look at utility bills for easily found profits. Telephone bills, in particular, provide an opportunity for significant savings. Energy-efficient lighting can reduce your electric bills by as much as 40%.
Further, rebates are available to aid you in upgrading your systems while other programs are designed to pay you for your energy savings. Experience has shown that employees are motivated to help conserve both water and electricity. Take advantage of this fact with our utility review services.

Overnight Mail & 1st Class Delivery

Overnight mail is a luxury. What did you do before it was available? Consider faxing documents, it’s cheaper than mailing. Also, if your clients are geographically close, examine bulk mail services. Within 25 miles, in most areas, bulk mail is as fast as first-class mail.

Company Owned Vehicles

New depreciation periods now make it more difficult to recover costs on vehicles. Consider an employee reimbursement program, or call us and we can advise you of the cost/benefit between purchasing or leasing your vehicles.

Automate

Automating manual systems can increase your profits substantially. Few businesses have yet to see automation effect at least a portion of their operations. Increased efficiency and accuracy are additional benefits to this process. Caution: Don’t get locked into today’s technology, as it will be tomorrow’s dinosaur.

Outsource Your Headaches

If you think you are too small to outsource, consider who does your payroll. Many business operations can now be outsourced providing you the opportunity to focus on what you do best. Billing and collection services, accounting and bookkeeping, sales and even human resources can be done cheaper and more efficiently by others.

Vendor Contracts

To reduce your raw material costs, talk to your suppliers about long-term contracts that include discounts for timing, delivery and inventorying of supplies. Through historical analysis, you may be able to identify trends that will benefit you both.

Budget & Plan

Few areas will provide you more cost savings than the ability to compare your current costs to a budget. In this manner, you quickly spot problems and can take action before things get out of control. By planning, you can also determine what impact various cost-cutting changes will have on sales, margins, and expenses. We will be glad to assist you in this crucial area.

Attitudes & Employee Inclusion

Cost cutting starts at the top. Few programs will be successful if management does not support them. Furthermore, employees can be invaluable in identifying areas of waste. To make an employee inclusion plan successful, you must provide for a sharing in the savings.

However, you must also be aware that quick fixes will have little lasting value and can be harmful long term. Cost-cutting is not a one-time experiment but an ongoing program designed to increase your profits. Carefully crafted and executed, a cost-cutting program can ensure the long-term health of your business.

Summary

Any business can increase profitability by reducing its costs. However, specific cost-cutting opportunities may be related to your particular business and industry. We have been advising business owners since 1964 and can compare your business to others in your industry in order to identify areas that need closer examination. By focusing on the critical areas, we can save you time and money and you can realize financial benefits quicker.