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Cost Reduction: Cutbacks Are Unavoidable
by Thayne Carper
More Economy Articles
Published on this site: May 4th, 2010 - See
more articles from this month
Good cost reduction means you must slash your expenses and costs
when possible, provided that this does not affect your product
quality or harm your operations. There are numerous approaches
to cutting expenses, and you cost reduction plan must identify
where you can save money.
Practical Cost Cutting Measures
By reducing utilities expenses, for example, your company will
save money that otherwise will have been spent inefficiently.
Reducing waste programs and office supply expenses are also
practical cost reduction ideas, as companies all too often burn
considerable funds in these areas without looking at cost-savings
alternatives. Consider cutting insurance costs, inventory
levels, or fixed asset amounts too.
Not only must a company owner find ways of reducing costs, he or
she must also figure out different ways of doing business with
third parties. It would be wise to research your vendor
contracts and uncover whether or not you can get a better deal
elsewhere. Good cost reduction plans will have you monitor
your equipment leases to seek out better opportunities for
savings. The list of cost reduction methods can be lengthy,
which is why you must spend careful time planning out good
strategies.
Look for Other Ways to Save
Reducing daily expenses that are adversely affecting the budget
may be enough for your company to obtain the objectives set forth
in your cost reduction plan. However, if these reductions are
not enough, then you must further investigate areas you can cut
expenses that will have a positive result.
Of course, you must take care in cutting costs in business and
always use good judgment. If you, for example, decide to cut
staffing, then you may find there to be significant
consequences. Fewer staff may mean it becomes impossible to
maintain delivery schedules. Layoffs can result in impaired
product or service quality, which would obviously be detrimental
to your business.
Layoffs are often the easiest expense to cut at first glance, but
the far-reaching consequences can prove they are simply not
worthwhile, and you would be best reducing your expenses by other
means. Cutting too many expenses can have other drawbacks; for
example, if you cut your inventory levels too much, then your
company may save some costs, yet may not be able to deliver its
products efficiently within your promised or a reasonable amount
of time. This will not endear you to active and potential
clients.
The Benefits of Cost Reduction
An efficient cost reduction plan will ensure businesses will not
let expenses run rampant even in good times. While keeping
costs reasonable may appear better than reducing your expenses,
you must take into account business cycles and that businesses
need to be able to quickly respond to a changing marketplace.
Even in good times, you must consider cutting costs, whether
it's as simple as cutting lights or something far more extensive
such as fewer capital equipment purchases. Cost reduction
involves both simple and extensive cost cutting measures, and
your plan should address various ways of eliminating, or at
least trimming, unnecessary and burdensome expenses.
Thayne Carper spent 4 years of college competing in student
business plan competitions. He's never won a business plan
competition and was dropped from his college's entrepreneurial
program for lacking potential. Today, he is one of the youngest
published experts on the topic of business turnarounds and cost
reduction. Visit his website lower supply costs up to 30% for a
copy of his report "The Definitive Guide to Doubling Your Profits
in less than 6 Months" (http://www.ThayneCarper.com/FreeReport)
and learn how you can easily lower supply and service costs
up to 30% without hiring a consultant. Learn more:
http://www.ThayneCarper.com/.
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