Controlling spending habits cannot happen until that spending is measured. Management looking for ways to cut costs in a business must, therefore, take the time to lay out their expenses in a way that makes different elements easy to compare with one another. Adding a visual element can help aid quantification, as well, since it can allow for more rapid comparisons or assessments.
To get to this level, you will need a set procedure. Here are some ways you can get started:
Look at Recent Vendor Contracts Signed
A quick way to begin tallying up spend on certain services is to review projected costs based on recent contract agreements. Vendors such as managed print services often bundle services on a rolling monthly basis. Reviewing these contracts can allow accounting to quickly assess projected costs for the next several months as well as recent spend on contracts.
Performing this process can give your business a quick indication of how much it is currently spending on vended services, allowing for rapid price comparisons when considering more cost-effective options.
Line Item Assessment
A much more time-consuming but concrete method of quantifying spend is to look through your ledger and record any expense not directly related to the production of a good or service or not directly related to employee compensation.
Such an accounting method can get messy quickly, though, and a lump sum total may not be as informative as needed. Thus, we recommend the following method instead.
Ideally, current overhead spend will be categorized based on the type of expense. So, for instance, printing expenses would include the cost of purchasing equipment, cost of supplies, cost of service and maintenance, and the cost of any ongoing contracts. Depreciation might also be a relevant item to quantify, even though it is not a literal “spend.”
If you can enter these expenses into a database, all the better. Having multiple descriptive meta-tags can allow for rapid assessments, reordering and visualization of data. Using a program like a Microsoft Access/Excel combo, you can churn out charts quantifying recent expenses while revealing metrics like “expense growth relative to operations growth.” After collecting this information, the assessment will pin-point areas where you can start cutting printing costs. Here are 7 of our favorite methods.
Benchmarking and Comparisons for Deciphering Ways to Cut Costs in a Business
Having a set of numbers is useless unless they tell some sort of story. With expenses, they should be able to tell you which areas have the most potential for improvement.
One method is to determine a benchmark based on an average expense of operations over a period of six months to a year. You could also simply highlight the highest and lowest expense months and attempt to detect trends from there. Other businesses in your field may also be willing to share their data on expenses to help you develop a basis of comparison, but they may also balk at sharing their financial data.
Getting the Help of Professional Cost Recovery Experts
Developing an expense control program can be time-consuming, messy and yield inconsistent results. Instead, you can enlist the help of professional cost savings consultants like Freedom Profit Recovery. We work on a cost recovery fee model where we only charge you a portion of the expenses you save. We also offer deep consulting, including providing advice on how to incorporate cost accounting efficiently within your workflow.
Learn more about ways to cut costs in a business and how we help by visiting our services page.