Find Savings By Reviewing Your Financial Plans
By John Chappelear
 
Most of us are struggling with our businesses right now. Sales are flat (if we’re lucky), collections are slowing, and people are disgruntled. Fear is a mindset and morale killer. This is the time to lead your company by finding ways to improve cash flow and cut costs. It is the perfect time to make sure the financial plans you have put in place are as effective as possible.

My rule of thumb for cost curtailment -- anything can run on 12 percent less. Like weight, the first 10 percent to 20 percent that you are trying to lose comes off easiest. Start by reviewing each of the following financial-plan categories that seem to change every year.

1. Rent – Demand a reduction from your landlord. Even if you have the discount added back later, now is when you need help.  If you’re the landlord cut the rent.

2. Communications – Who is your carrier? Why are they the carrier? Are there ways to reduce your costs?  Maybe you can save money by getting new equipment from a different carrier.

3. Employee health insurance – I don’t think you should eliminate health insurance but you can review your policy and see if you can change the deductible to reduce rates.  Or consider changing providers.

4. Legal fees – These seem to keep creeping up.  Ask your attorney for an audit of legal services, and a list of those that they can reduce or eliminate immediately. Also, ask them what services you could bring in house that they are handling for you now. Your attorney wants you to succeed because they want a client for the long-term. They will help you find ways to cut costs.

5. Advertising – This is the time to improve advertising.  You should ask for an audit like the one the attorneys are providing.  Review where you are spending money; see if there might be smarter ways to get your name into clients’ minds. Stop focusing on providing information about your company, like in traditional advertising. Find ways to provide value to clients instead, like through e-mail blasts. When you provide value your clients, not only will they become more secure, they will also become advocates who tell others about the importance of using you. Low-cost means such as e-newsletters and Webinars  (all free or almost free) will keep you in your clients’ minds.

6. Loan costs – Banks are struggling too. Have a heart-to-heart with your banker and see what they might do to help. They have flexibility. Banks don’t want you to fail and they definitely don’t want your collateral. They just want to get paid back.

7. Accounting – Treat this exactly like the legal reviews

8. Travel – Do you really need that level of hotel? Do you have to fly first-class? Heck, do you need to make that trip at all?
Find ways to stay home and cut the costs. Between Webex, Go to meetings, Adobe and Skype (just to name a few) you can set up a perfectly acceptable virtual meeting.  I have been developing Webinars just to help clients reduce the costs of flying me around the country

9. Raw materials – Once again, ask your supplier for an audit and for recommended reductions.  If they are a reputable supplier, they will be honest about ways to help you reduce costs and improve cash flow.  Like all the rest they do not want you to fail.

10.Employee costs – If you need to reduce staff, cut quickly, cut hard and cut deep.  It is much easier and much better to hire people back than for them to constantly watch for the “layoff look” on your face every Friday afternoon. Once cuts are made, pull your people together. They need to believe that they are with you for the long run and not just here until the next sales and profit numbers arrive.

These are 10 good areas in which to look first because you can immediately put money back into your pockets. But you should review all parts of your financial plan for savings.
 
A successful bank president told me something once that I will never forget it:  Cash isn’t cash unless it’s cash. I purchased a company once and on the first day called the landlord about the rent. I told him we could move out the next day or he could reduce his rent by 50 percent, thereby maintaining a fully rented space with no loss of rent and no cost of looking for a new client. He said “no problem.” Though he was not excited, he was happy to have half-the-rent guaranteed instead of nothing.

Each of these 10 elements in your financial can be evaluated just like that.  What can you cut, reduce, eliminate or postpone payments on? There are things you can do and things you can do today.

Remember to stay client-focused though, and don’t reduce expenses that will save you money but cost you clients. Also, look at yourself in this equation.
Can you personally get by on less? Are you the landlord for your business?

Maybe it’s time to personally run a little leaner. Staff morale goes down and fear goes up when they think you are only focused on protecting yourself. Pull the details of each of the categories and create your own line-item veto.  Make sure everything has a valid justification for where you are now, not last year or even last month. Lean on your suppliers and maintain high-touch value with your clients. You’ll weather this storm and come out the other side a lean, mean fighting machine.