Cost Control

5. Opportunities

Effective use of a systematic approach will highlight opportunities to control costs with little risk. In some cases, there will be easy savings such as cutting the cost of supplies (see 4).

In others, cost reduction will require changing the way you do things. Some of the most common opportunities are listed below. In every case, be aware of the potential pitfalls (see 6).

5.1 Reduce your payroll costs.

• Outsource non-core activities.
• Use consultants, freelances or part-time employees, instead of full-time employees.
• Redesign processes to eliminate duplication of effort and to cut out activities that waste time.
• Make more use of technology and automation.
• Do not overpay when recruiting new employees.

5.2 Improve your purchasing.

• Switch to cheaper suppliers, or negotiate price reductions or higher discounts for early payment.
• Consolidate purchasing with fewer suppliers to get better discounts.
• Agree long-term supply contracts or guarantee minimum annual purchase volumes in return for lower prices.
• Build personal relationships with suppliers to encourage preferential treatment.
• Simplify purchasing procedures to reduce your costs, and those of your suppliers.
• Form strategic buying alliances (eg purchasing consortia) with businesses in your area or trade to buy larger volumes.
• Give individual employees purchasing limits to reduce administration and ask your bank about purchasing cards.

5.3 Find ways to make production more efficient.

• Trim back your product range and increase production runs.
• Use standard components to lower design, purchasing and manufacturing costs.
• Change processes to minimise wastage of raw materials and energy.
• Improve quality control to cut rejection rates and reworking costs.

5.4 Review your finances.

• Finance fixed requirements using loans, instead of overdrafts.
• Reduce unnecessary overdraft and loan facilities.
• Cut back on working capital through just-in-time purchasing, better credit control and agreeing longer payment terms with your suppliers. (See Credit control.)
• Apply for grants and subsidised loans.

5.5 Get the most out of your premises.

• Introduce homeworking or hot desking to cut space requirements (and travel costs).
• Reconfigure existing premises and work flows to minimise wasted time and space.
• Sub-let spare space.
• Control utility costs.

5.6 Cut the cost of communications.

• Use email whenever possible.
• Use the corporate intranet to reduce duplication of information and unnecessary meetings.
• Use cheaper telecoms facilities (eg alternative suppliers, leased lines).