Strategy 3: Control your expenses

Regularly review your expenses by comparing them against your budget and prior periods. If an expense is greater than budgeted or than the previous year then investigate the reason for the increase.

 

Examples of how to control your expenses:

§ Compare expenses against your budget.
§ Compare expenses against the previous year or period.
§ Compare expenses as a percentage of sales.

§ Train your employees to be thinking about how expenses can be reduced. Reward them for ideas that reduce expenses. Rewards don’t have to always be monetary. Be creative with the reward system.

§ Review the transaction listing to understand each expense.
§ Prepare regular financial reports.
§ Require quotes from various suppliers.

§ Rearrange annual payments into small payments. This generally costs more and should only be used when needed. Revert back to annual payments once you are able.

 

§ Implement performance measures to monitor your expenses. For example, measure the costs of vehicles on a cents per kilometre basis.

 

Caution: Before
reducing expenses ensure you are not reducing
your competitive advantage
as a business. For example, if
customer service is your
competitive advantage,
reducing a sales person may
cause that advantage to be
lost.