Strategic Planning

Cost-cutting Essential to Maintaining Profits


Why cut costs now?
Efforts are multiplying to cut costs wherever possible in order to achieve or preserve high profits. The resulting benefits for all of a company's employees should be obvious.

It should be obvious, but sometimes it is not. One of the lessons of the Dot-Com debacle is that many of the companies went belly up due to profligate spending by the executives.

Of course, you would like to achieve high profits by having a record-breaking sales year, but that may not be likely to happen this year given all of the uncertainties of the economy and the political situation. Levels of sales success are certainly unpredictable.

The level of sales, however, is only one ingredient in the recipe for success. You must also be interested in keeping your costs as low as you can, because the real number to watch is your profit, the difference between your income and your spending. Remember that this year can be more successful than last year even with lower sales if you can reduce your spending enough.

To increase profits, you can either increase your income, reduce your spending, or both. As your salespeople are aggressively searching for additional customers as well as seeking opportunities for more sales to existing customers, the rest of the employees can work on the other end: reducing costs. If sales are lackluster or even dismal, your cost-reduction efforts can ensure your survival. On the other hand, if sales are great, you can use them to achieve a banner year.

Get everyone involved
Everyone can participate in cost-cutting efforts. Here are a few examples:

Reduced travel - Many meetings formerly held in person are now managed by video-conference or simply by teleconference. Perhaps even senior managers can reduce their in-person meetings from one a month to one per year.

Increased use of e-mail - Communications that once took place in person or by phone are now routinely done by e-mail. Even faxes are beginning to use network connections rather than more costly telephone lines.

Economy of scale - By combining the purchasing power of multiple sites, you can reduce the cost of routine purchases, such as uniforms, computers, and office furniture by obtaining volume discounts from your suppliers. Negotiating new leases for photocopiers and other equipment might save you thousands of dollars per month.

Increased utilization - If you can increase the percentage of time each employee is doing productive work, you can save a lot of money. Encourage employees to use their down time either for gaining additional training or for seeking ways to improve the efficiency of their processes.

Seek suggestions from employees - Ask your people, "How can we accomplish the same thing for less money?" You will be surprised at the creativity they have. At my company, for example, in response to an employee suggestion, water coolers placed at strategic locations throughout the plant have replaced providing individual bottles of water to employees. This has already resulted in a significant savings per week.

Better use of copiers - Employees can save considerable copying expense by using color copiers only for final drafts and increase the incidence of two-sided copying.

How can we cut costs even more?
Everyone in your workplace can get involved in this process by finding opportunities to...

  • Improve your processes so that you can accomplish the same excellent results in less time, with less effort, and for less expense;
  • Eliminate waste;
  • Employ teamwork; and
  • Find ways to add value to what you are doing without adding cost.

Ideas needed
You need each employee and every department to bring forward any suggestion or idea on cutting costs. Create multiple ways of passing along each idea, such as:

  • Present it to your department manager;
  • Share it with any member of your Quality Circle;
  • Write it down and drop it in a suggestion box at your site; and
  • Call it in to a suggestion hotline (voice-mail).

Investments must continue
All of this emphasis on cost-cutting creates the danger of cutting too much. The purpose of all of these measures is to ensure your ongoing profitability.

Some things you should not cut. For instance, you must not cut expenditures your need for facility upkeep or upgrades or to keep pace with technological advances. Neither can you afford to cut back the service you offer to your customers. They must continue to receive the best service you can deliver, combined with the speed and accuracy they have come to expect.

In reality, these are all investments rather than costs. You cannot afford to neglect your investments in facilities, technology, and your people. The long-term costs would be too high.

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Copyright 2005 Steve Singleton, All rights reserved.

Steve Singleton has written and edited several books and numerous articles on subjects of interest to Bible students. He has been a book editor, newspaper reporter, news editor, and public relations consultant. He has taught Greek, Bible, and religious studies courses Bible college, university, and adult education programs. He has taught seminars and workshops in 11 states and the Caribbean.

Go to his DeeperStudy.org for Bible study resources, no matter what your level of expertise. Explore "The Shallows," plumb "The Depths," or use the well-organized "Study Links" for original sources in English translation. Sign up for Steve's free "DeeperStudy Newsletter."


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