expenses to increase the bottom line
topic for today is increasing profitability. When we ask retailers
for input, we will most likely hear two traditional suggestions:
increase sales and increase margins. While true, they are two of
the hardest ways to increase profits. Let's take a look at 10 other
possible ways to increase the overall profitability of your business.
Examine your employee schedule. After inventory, wages are the largest
expense your business has. If you have the data to review your sales
history, you should see a pattern by day and month indicating when
you need your sales help.
While you are reviewing payroll, ask your workers compensation insurance
sales rep to help you review how you have categorized your employees.
You may find you have employees in higher-risk categories than necessary.
Advertising. If you consider advertising a necessary expense rather
than its being a method of drawing customers, you are probably wasting
advertising should be calculated as a percentage of monthly or annual
sales. Of this figure, you should set aside approximately 10 percent
for last-minute opportunities and advertising expenses that are
over budget. You will often get a better rate by making an annual
commitment rather than simply buying advertising time or space when
the sales rep calls on you.
Insurance. You should put your insurance coverage out for bid at
least biannually to make sure the price you are paying is in line.
As you visit with prospective agents, ask them where you can save
money. Many policies allow seasonal fluctuations of up to 25 percent.
If this is the case for yours, you can consider calculating your
highest inventory level, subtract 25 percent, and buy inventory
coverage for this amount. If your business is renting space, make
sure you are not buying coverage for something that the landlord
Review your utilities expenses. Your cooling and heating systems
have filters which should be checked each month and, if necessary,
replaced. These systems should have at least an annual checkup to
make sure they are operating at peak efficiency. You should also
shop your long-distance service. Check your water usage by making
sure all faucets and toilets are functioning properly. In many communities,
your sewer disposal rate is tied to water usage, so if you are wasteful
with water, you are paying twice.
with your garbage disposal company. You may find savings by deciding
to recycle the large amounts of cardboard and paper you use.
Are you utilizing your bank? If all you do with a bank is deposit
funds and write checks, you should consider doing business where
it will cost less. One dealer reported saving over $100 each month
by changing banks after he took copies of his recent statements
to other banks and asked what their fees would be.
Outside services is a category that is often a catch-all for the
miscellaneous expenses of business. However, an annual review of
what you are categorizing as outside services is a mandatory step
in keeping expenses controlled. You may also find certain tasks
you or an employee are doing, such as payroll, could be better or
less expensively done by an outside service.
Accounting and legal expenses are usually grouped together. While
you hopefully have a minimum amount of legal expense, the accounting
service is always suspect. Review what you are getting from your
accountant each month and ask other retailers what they are spending
for these services. Too often a retailer pays an accountant several
hundred dollars each month for a financial statement that he does
not fully understand and does not use to make decisions. If the
accountant is not helping with this, it may be time to look for
As a category, Supplies usually contains all the paper goods used
in operating a business. The first place to reexamine supply expenses
is the various places you buy forms. Anyone who has ever ordered
a printed form has found that the difference in price between 1,000
and 5,000 copies is minimal. The expense-watching business will
calculate the number of forms used within a year and order quantities
that will not only cut down the frequency of ordering, but also
save valuable dollars for the business.
Repairs and maintenance are often hard to control. After all, if
something breaks, you must have it fixed. However, many companies
offer service contracts, which can work to your advantage. You may
be able to negotiate a maintenance contract for your heating, cooling,
delivery vehicles, computer system, and other equipment. On the
other hand, if a piece of equipment rarely has a problem, you may
want to consider canceling a maintenance contract and paying for
repairs as necessary.
expenses is not a cure-all for a business. It takes a joint effort
of increased sales, working to improve margins, and cutting expenses
to maximize a business. However, as the old adage says, "If
you don't spend it, you don't have to sell something to cover the