If you are thinking about opening your own clinic or practice, you know that it is important to be thorough when making the business plan, which among other items, includes the calculation of the cost per patient (more…)
It is a real challenge to improve the margins and indicators of the company while maintaining product quality. (more…)
Keeping your company’s costs down is a great advantage in business. However, in a volatile and competitive market, it is not always easy to answer the question, “how to control and reduce costs?”
Controlling your costs has become a priority as important as increasing your company’s revenues. This is why performing an internal evaluation of expenses and understanding how your processes function is the best path to identifying unnecessary costs and establishing an efficient program that will offer sustained benefits for your business.
However, it is up to entrepreneurs to find the best strategies to reduce costs and streamline business management processes. And that reduction means getting more flexibility to take advantage of market opportunities.
Thus, it’s essential to make investments and reap the benefits of this endeavor. However, we do recognize that reducing expenses is a big challenge, which is why we’ve selected a few tips to help you on your way. Take a look!
Before you create an action plan to reduce your costs, you need to make an evaluation of your company’s expenses. Once you’ve collected this data, make a detailed analysis of your expenses from the most relevant (or the largest) to the least relevant. This analysis will allow you to identify many “hidden” costs that are certainly affecting your company’s results.
Knowing every expense is essential to coming up with possible solutions. Besides, by going through this exercise, you’ll be able to measure your main expenses and identify those that are unnecessary, or in other words, those that don’t add value to your company. Remember that it’s impossible to manage what you haven’t measured.
To take assertive control of your expenses and reduce costs, it’s important to visualize your reductions over the short-term, the medium-term and the long-term. To do this, evaluate alternatives that will reduce your costs over a longer timeframe. That way, your company will not risk basing its results only on the short-term, which won’t last very long. A study conducted by McKinsey shows that only 10% of cost reduction projects were successful 3 years after their implementation.
Evaluating only ledger accounts or cost centers is not enough to identify potential bottlenecks and problems in your company’s processes. Therefore, when thinking about processes, many activities are revealed – such as rework, duplication, or processes and actions carried out with low value for the company and its customers.
The problem is that many companies have difficulty mapping and understanding all the processes involved in the production of their products or services. Completing this task takes time and requires the business to commit to evaluating the enterprise.
It is important to define what are the outcomes or products delivered at the output of each process, its components, suppliers and limits. Since controlling and reducing costs are tasks that require information, you need to pay attention to internal processes.
Negotiating with creditors can be a viable alternative to controlling and reducing costs. Therefore, make agreements with suppliers and negotiate the best payment terms so that they can be realized without major financial consequences.
In addition to this, rethinking contracts and researching the market to find out what’s available from other suppliers is a strategy that can also offer large savings for your business.
So, improve your purchasing sector. That way, this department will be able to find trade partners that help boost your business but also do not represent unfeasible investments.
As controlling and reducing costs may cause the company to switch suppliers, this possible change has to occur with the right planning. This prevents this exchange from harming the company’s workflow or the quality of what is offered to the customer.
Enterprise Resource Planning (ERPs) is a solution that enables enterprise-wide data integration. However, they do not offer all the subsidies for efficient cost management, especially when we want to understand the impact of indirect costs on various products and services.
The tool is also not able to simply model profitability analyses per customers, channels or regions, which is so critical nowadays. Faced with this demand, companies (such as MyABCM) offer advanced tools for cost, profitability and performance management through software designed specifically for this purpose.
Reducing company costs is the best decision, especially in a market that’s this volatile and selective. This decision requires investment in appropriate technology. And just the desire to accomplish it is not enough if the company does not have the right tools for this mission.
There is no reason for a business to absorb hiring and payroll-related costs from non-priority sectors. Therefore, when working with outsourced labor, the company gains efficiency, as it hires a partner specialized in that market to serve it.
In addition, there is more freedom to demand results and compliance with what was agreed in the contract. The business can also take advantage of talent of their managers and Human Resources professionals in the management and training of employees who are essential to the brand’s target activity.
Because controlling and reducing costs requires efficiency, outsourcing is a perfect alternative to achieving better financial results without disrupting internal activities.
While this topic sounds more like an investment than a cost-cutting action, keep in mind that rework can negatively impact the results of a business. Therefore, ensure that your employees receive appropriate training after hiring and that they are able to perform their duties.
In addition, if you identify failures, turn them into learning, using them as cases in internal training. That way, the company will be able to understand how to control and reduce costs through strategies that keep their staff motivated and feeling valued.
After all, educating a professional – making their performance better – can be more beneficial to an enterprise than trying to hire someone who already has certain professional qualities.
Technological advancement can also be used to fight against waste, from the simplest, such as resource consumption, to the most complex, such as improperly performed activities.
Unnecessary costs are associated with a company’s lack of knowledge of what is most modern in its market, and what could be used to make it more efficient.
As we have seen, answering the question “how to control and reduce costs?” requires managers to be willing to assess their companies with a careful eye, examining the details without fear of having to admit that certain strategies did not bring the expected results.
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As markets are becoming more and more competitive, managers need to find ways to make their processes more efficient and achieve better results.
The concept of Lean Six Sigma and the benefits it brings have arisen to help companies in this aspect. Keep reading this post to find out more about this topic!
To better understand what Lean Six Sigma methodology is, first we need to understand the separate concepts of what is Lean and what is Six Sigma:
Lean Six Sigma is a combination of both philosophies which seeks to achieve excellence by optimizing processes and reducing waste. This concept has arisen due to the desire of companies to make their operations more agile and efficient.
Lean Six Sigma can be applied to any company that‘s seeking to maximize its results and make its operations leaner and more precise. However, the first step in doing this is to be aware that you’ll have to break paradigms and you’ll need to be willing to do this.
The change begins with the mapping of your processes. In addition to evaluating your activity flow searching for errors and waste – to eliminate them – you also need to understand how a company creates value for its customers.
When the creation of value is defined, this is when you should identify which steps in each process don’t contribute to this goal and eliminate them, adjusting your work methods so that your operational performance doesn’t suffer.
The focus should be on improving processes and avoiding waste, which can be characterized as:
In general, the goal is to implement this philosophy in your company and create conditions that will ensure that the correct materials are used, in an appropriate place, in an ideal quantity – always avoiding accumulations of material and losses and correcting process failures as they occur.
The adoption of the Lean Six Sigma methodology offers various advantages for your company in terms of production and your overall results. Among these benefits, we can mention:
Applying Lean Six Sigma takes time, but it’s relatively simple and it will bring your company closer to achieving excellence in its activities. In addition, with all the improvements made, it’s safe to say that it will also provide you with a competitive advantage.
Frequently reducing costs ends up becoming a necessity for a manager. However, it’s extremely important to know how to do it, because it will, after all, affect your company’s strategies. Contrary to what many think, reducing costs isn’t something bad and doesn’t always involve laying off employees – and it can, even, serve to stimulate greater efficiency in your company.
Want to know how you can reduce costs without having a negative effect on your company, your employees and your working environment? Then read our tips!
The first step is identifying where your company is wasting resources. Small expenses, considered insignificant, can represent great savings for your company.
Electricity is a good example of this concept. That’s why you should verify the efficiency of the equipment that you use in your company. Exchanging them for more economic models could be a good investment.
Companies need targets, not just to encourage growth, but also to measure the assertiveness of the decisions taken. When entrepreneurs have to decide how to reduce costs, they need to maintain the strategies that have worked in the past, rather than those that have proved to be mistaken.
A good source of information is evaluating the targets that have (or haven’t) been attained. They will provide you with valuable data.
Rework is synonymous with losses. If your company has to do a lot of rework, investigate the cause. In many cases, employees haven’t received adequate training and this is why they can’t perform their jobs well, wasting their work time, and in some cases, raw materials.
Instead of beginning a hiring process — which is normally expensive — look at training your current employees. Besides being less expensive, which will contribute to your cost reductions, this initiative can greatly improve your company’s efficiency.
A good way to discover how to reduce costs is to reevaluate your company’s investments. Many companies have investments that are distant from their area of expertise. In some cases, the rates of return aren’t advantageous and these investments only generate the expenses of maintaining them.
Your company’s investments, besides being safe, should be simple to manage — this way, you’ll save in terms of fees and/or the costs of the professionals responsible for monitoring them.
Besides improving your buying process, meeting with your suppliers can be a way to discover how to reduce costs. In many markets, there’s been an increase in the number of companies that can be considered potential suppliers. Your purchasing department should evaluate the reputation of these companies — as well as delivery logistics and payment timeframes — to know if it’s viable to change a supplier.
The entrepreneur should always be looking for chances to reduce company costs. This attitude normally results in improved company processes and greater financial solidity for your business. It shouldn’t be seen in a negative light, and certainly not associated with layoffs or compromising the quality of your final product.
It’s rather a series of natural and constant advances that can be found in successful companies. It’s necessary for businessmen to keep their business data in an organized and secure form, because this will be fundamental when it comes time to find ways to streamline your company’s processes. Remember: you can’t manage what you can’t measure!
The current economic situation has caused companies to reinvent themselves, changing the way they act in the market, and has also led them to try to reduce their operational costs. Reducing costs is the simplest decision to make when your goal is to leverage your gains and differentiate your company in the market.
There are various ways to lower your company’s costs, ranging from improving tasks and reducing material waste to the feared large scale layoffs.
These days there are new innovative and efficient ways to reduce costs that guarantee great results for the companies that adopt them. That’s why we’ve selected the 4 best trends when the subject is reducing costs. Check them out!
Cloud computing is one of the most recent market technologies. Storing your information in a cloud can be integrated with your company’s most varied processes and operations, making your data exchanges faster and significantly more efficient.
Besides a considerable reduction in server and maintenance expenses, this storage technology enables you to centralize repairs – you don’t have to manage various computers and servers spread throughout your organization.
Importing machines, equipment or materials increases your company’s costs in terms of taxes, fees and transport, among other things. There’s an easy way to avoid all of the expenses related to importing: use suppliers within your own country.
Finding domestic companies that meet your needs is a trend that has become more common due to the high value of the dollar. Buying equipment and materials from Brazilian companies will save your business thousands of reais by the end of the year. That’s the reason why you should search the market thoroughly for suppliers that can meet your demands.
One of the fundamental tenets of business administration states that inventory is money that isn’t doing anything – and it means less available cashflow. In addition to this, working with large levels of inventory results in various costs for your company such as the hiring of more workers, the need for a larger physical space, the acquisition of special storage closets and compartments to store your products – as well as the administration of your storage space itself.
Thus, a great way to reduce the costs of managing your business is to work with lower levels of inventory. In doing this, don’t stop trying to be more efficient in your tasks and services, because this allows your inventory to be as small as possible leaving just the amount required for your company’s operation.
Having a well trained professional team, besides increasing the quality of your products and services, allows you to achieve great reductions in operational costs. This is why training your employees is fundamental for every company that wants to differentiate itself in the market.
It’s important to remember that trained employees can easily resolve everyday problems and are of great help in improving tasks and reducing small losses.
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Reducing costs is an essential topic in terms of positioning your company in the market. This step comes with a series of challenges, because it’s not enough to cut costs or the number of employees. You need to invest in planning.
Strategic management is a tool that helps managers increase profitability, avoid waste and keep their company in front of the competition by setting it apart from others in the market.
In this post we offer 5 tips to optimize your evaluation of costs and gain a competitive advantage. Check it out!
It may seem like an obvious idea, but many companies don’t include cost reduction in their targets. Strategic management is not only oriented towards increasing sales, but also towards making a forecast of costs that don’t affect essential aspects of your company or quality of service. Intelligent planning is the road to making the investments that will lead to your company’s growth, not its failure.
Reducing costs in a way that compromises your company’s quality is not an intelligent management strategy. The customer is the main source of a company’s income, and this is why cutting costs for products, services and customer service will have a negative effect on your company’s image and cause a steep decline in sales in the medium and long term.
Monopolizing the strategic management of a company is a great mistake when we’re dealing with cost reduction. Internal communication should be focused on getting all of your employees on the same page.
You should do this not just in terms of seeking solutions, but also in terms of increasing productivity and in everyday activities such as the use of cleaning products, electricity and the telephone, and any other activity that can minimize costs.
The value chain concept developed by Michael Porter is an efficient way to identify activities that add value to a company and also those that can be eliminated, and examines the entire process starting with the acquisition of raw materials through the delivery of your product and concluding with customer service.
This chain is divided into the main activities that are related to sales, maintenance and support, such as:
And the support activities:
By structuring your company using this model, you as a manager can evaluate costs more easily and identify what affects profits, the activities that add value and don’t add value, and how you can optimize your customer service.
In addition to the value chain, many specialists focus on Michael Porter’s models to detect errors, avoid reworking and increase competitiveness. The generic strategies proposed by this Harvard Business School professor focus on:
These models are very helpful in guiding your strategic management, but like all theory, they include aspects that may not fit with your targets or your business model. The ideal is that you define the best strategy for you in terms of scope and integrate it with your other business tools.
Did you like these tips? If you’re looking for advanced strategic management solutions, be sure to contact us!
Logistics plays an important role in corporate management. Through control and execution planning, you can optimize this area’s processes, reduce its costs and increase your profitability. However, seeking to make your logistics efficient implies some costs that often discourage businessmen from investing in this area.
In this article, we’ll present 6 ways to reduce your company’s logistics costs. Take a look!
Program your delivery routes more intelligently, considering a number of variables – such as, for example, whether there’s an intense flow of deliveries to the same region. Rethinking your routes will offer your company savings, because it will help identify less expensive practices, as well as errors and unnecessary spending.
There are several pieces of equipment that are mainly used in handling and storage, such as forklifts, pallets or conveyor belts. To reduce your logistics costs you need to constantly evaluate the performance of these items to identify bottlenecks and excess workloads that can make your processes more expensive.
To opt for the most appropriate form of transport, you need to take into consideration factors such as the distance traveled, the volume of products to be delivered, and the cost of each means of transport, among other things. This will allow you to substitute rail for air in the case of closer deliveries, for example. It’s also interesting to evaluate alternative forms of transport, such as motorcycles or bicycles. They can often be more appropriate for your purposes.
Investing in technology brings good results over the long term. If you decide to outsource, bet on companies that offer high tech solutions. You should also use computer systems in your own business. To control logistics costs, cost control software is recommended. Doing this can even improve the quality of the products and services that your company offers.
Key Performance Indicators are essential for any operation. It’s no different with logistics. You need to identify which points need to be evaluated and then choose the best performance indicator for each one. With the correct KPI, you can improve your resource management and reduce extra activities and thus your logistics costs.
Storage is still expensive for managers. It’s more important to use your space intelligently than increasing its size. Rethink your storage area layout, invest in systems that will help you manage your stocks and seek ways to reduce your stocks such as demand forecasts. This way you can optimize your storage process and reduce your costs.
Logistics costs involve storage, handling and distribution. These processes are fundamental to the proper functioning of your business. That’s why it’s important to know ways to reduce your logistics costs without harming the quality of your company’s services. Thus you’ll be able to improve not only your rate of return, but your customer service as well.
So are you going to put some of these ideas into action? Take this opportunity to leave a comment and share your experiences and opinions with us!
Strategies that optimize the financial management of a large company are indispensable for decision making. After all, every action taken by directors and managers needs to be aligned with your company’s financial planning and cash flow. This is why your control of costs and expenses should offer extremely consistent information.
Below we present 5 tips on how to best control your costs and expenses. Understand how to analyze your company’s finances efficiently, without giving too much importance to losses or negative indicators.
To achieve the best results, your company should follow detailed financial planning. Using good software, it’s possible to analyze and forecast estimated costs as well as revenues for a given period. It should be emphasized that these analyses should consider all of the companies fixed expenses.
Together with financial planning, you should consider having an organized and clear cash flow. To organize with clarity all expenses, revenues, accounts payable and receivable, investments and other indicators, it’s interesting to:
Bad stock planning can lead to unnecessary expenses directly affecting your company’s finances. Your company should invest in stock planning, always considering sales levels: keeping an item with low sales in stock leads to large storage costs which are not desirable.
The best way to organize your stock and plan it to maximize your company’s returns is to use stock management software. Automating this process reduces your risk of errors and therefore losses.
There are some decisions that improve the reputation of companies, especially from the point of view of suppliers. One of them is anticipating payments or making them on their due dates.
If a supplier of products or services offers considerable discounts for anticipated payments, this may be of interest. In addition to a good image, anticipating payments improves your credit. For your company’s finances, these discounts can economize resources that in other scenarios could be useful.
Hiring and firing employees are processes that involve costs. Defining the best possible moment to alter your workforce is a strategy that directly helps you control costs and expenses. In addition, you should consider the real necessity of training, mainly performed by external partners.
The great secret to controlling costs and expenses is the adoption of processes that simplify decision making. Obtaining precise consolidated information — through automated processes — reduces the risk of erroneous decisions and losses.
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The crisis that has afflicted this country’s economy has affected the profits of many companies. In such an uncertain scenario, good managers need to reevaluate their businesses and seek to survive this time of turbulence while maintaining their company’s health.
Increasing profits by reducing costs is essential to this process. However, it needs to be done in a planned and organized fashion.
Reducing costs doesn’t simply mean cutting spending in a haphazard manner. You need to understand the nature of each cost and its relationship to your company’s sales and profits.
Thus, we’ve written this post to offer tips on how to cut costs in an intelligent manner and also increase your business’s profits. Read on!
Establish goals
Identify all your costs and expenses for at least the last six months. After careful analysis, establish reduction goals for each item. This is known as cost forecasting, and should be done monthly.
In addition, you should keep track of costs regularly, comparing your forecast with what was effectively spent month by month, verifying if your goal is being achieved. If it isn’t, you should analyze what could be impeding the realization of your goals.
Be careful with false impressions
A large sales volume doesn’t necessarily mean large profits. Often increased sales give an image of prosperity, while behind the scenes expenses are consuming all the profits.
To get real results, spending has to be used in an efficient manner. This can be achieved by increasing your average ticket (the customer’s average purchase), optimizing the ROI (return on investment) of your campaigns, and improving your procedures and internal methods.
Analyze your costs in percentage terms
In analyzing your costs, use percentages instead of quantities of money. It’s good to do this because if your sales increase but a cost remains constant, this cost now represents a smaller percentage of your sales volume. And when you diminish your cost percentage, you’re increasing your profits.
On the other hand, if your sales volume remains constant, you can increase profits by reducing the cost of a specific item. This way you can strive for two goals: diminishing specific expenses and increasing productivity at the same time.
Use a reliable system
Before you determine whether a cut in spending will increase your company’s profits, you need reliable information about your operations. This data can be obtained from a system which offers strategic management of your company’s costs, profitability and performance and is integrated with your company’s existing systems.
With this solution, you’ll have access to basic and complex graphic analyses, and the ability to execute advanced simulations for possible economic scenarios. This is important in preparing monthly reports, budgets and evaluations of your operations.
Did you like our tips? Are you ready to reevaluate your business and reduce costs? Leave a comment and share with us the difficulties you have confronted in managing your company’s costs.
