Cut the Fat Without Losing an Arm

Don’t sacrifice everything to the bottom line; cutting costs by letting go valuable employees can be a drastic measure. Use these questions to inspire new thoughts about efficient budgeting.

1. In what different ways can we use our facilities to generate additionalrevenue?
2. Are there add-on sales opportunities, where we can sell ancillary productsto our existing customer base at no additional cost to us?
3. Is there value in our customer database?
4. Are there significant heavy users of our products that could be isolatedinto a separate group for special product offers and additional sales?
5. How often do we lose customers?
6. Can we develop a retention strategy for those customers?
7. What additional actions can we take to augment our business products orservices?
8. Are there opportunities to license or franchise our business?

Salaries

1. How many hours a week do our managers work?
2. Should they be working 45 to 55 hours instead of 40?
3. How many of our employees take advantage of direct deposits for paychecks?
4. How well do we manage our salary administration program?
5. Have we established target compensation ratios based on the personality ofour business?
6. Have we established a desired community position, knowing where we want tobe with regard to our competition?
7. Do we have a salary administration program?
8. Do we have a salary range philosophy?
9. Do high-performing employees get higher increases than those who have notperformed as well?
10. Do we establish a salary increase guideline budget and stick with it?
11. Are salary increase guidelines pre-approved?
12. Do we have a salary administration program that offers employees a salaryreview on an anruversary of the hire date?
13. Do we know whether our company would qualify for targeted tax job credits?
14. Do we have a training rate for all appropriate positions, where employeesreceive a lower rate until they are trained?
15. Do we have a 90-day probationary rate for certain positions?
16. Do we have a labor management system that helps us schedule labor in15-minute increments?
17. Do we have a software program that reconciles cash and allows employees tocash out quickly at the end of shifts?
18. Do we constantly look for labor reductions by modifying our software?
19. Do we have industrial engineers do time-and-motion studies to determinewhether additional efficiencies can be gained?
20. Do we have an incentive program to help reduce absenteeism?
21. Is our business a high-turnover business? what can be done to reduce ourturnover rate?
22. Does our business utilize a vacancy factor?
23. Do we measure all of our costs by various units (such as cost per test,cost per guest check, and cost per widget) in order to determine areas ofcontrol?

Payroll Burden

1. Have we ascertained the difference between full-time and part-timeemployees and the benefits they should be receiving?
2. Have we evaluated the cost of our 401(k) administration program to see howcompetitive our costs are and to determine whether additional savings arepossible?
3. Have we evaluated the cost employees are paying for participating in ourbenefits?
4. Have we established a vacation policy whereby vacation time must be takenthe year in which it is earned?
5. Do we have a sick time buyback program whereby employees can sell backsick time at reduced rates?
6. Have we instituted a vacation buyback program allowing employees to sellback unused vacation hours at a reduced rate?
7. Have we evaluated a cafeteria-style benefits program?
8. Have we aggressively tried to reduce worker’s compensation insurance byeliminating accidents?
9. Do we understand how our true burden percent is budgeted?

Communications

1. Have we authorized a telecommunications consultant to analyze ourcommunication costs in terms of rates charged, equipment used, or programsoffered? Perhaps the consultant could be compensated in accordance with afee structure based on a percentage of the savings. If there is no savings,there is no fee.
2. How often do we renegotiate rates and terms with vendors who provide uswith communication services?

Utilities

1. Have we authorized a utility consultant to analyze our utility costs?
2. Do we have in place a mandatory energy conservation program wherebythermostats are set at a standard temperature?
3. Do we have a policy that lights are turned off in conference rooms andrest rooms when these rooms are not in use?
4. Do we have a procedure for turning off all other than security lights atthe close of business?

Professional Fees

1. Do we challenge fees charged by outside attorneys?
2. Have we reached an understanding about how much we will be charged, or do wejust pay whatever outside professionals bill?
3. Have we sought to get the most favorable fee arrangement in each case?
4. Do we try to settle our legal cases?
5. Have outside attorneys designed a format to use for routine scenarios?
6. Have we attempted to negotiate contracts giving us a guarantee as to aminimum number of hours?
7. Do we use less expensive attorneys for small collection transactions?
8. Do we try to share costs when appropriate and make sure there are noconflicts of interest?
9. Do we give lawyers all appropriate records at the first meeting in order toeliminate the need for phone calls regarding missing items?
10. Do we insist on an itemized statement each month?
11. Do we suggest PBF approaches to the attorney? Maybe we can save the lawyer’sexpense, which would offset or reduce the cost of our service.

Marketing

1. Do we ensure that our advertising agency does a postbuy analysis on alladvertising buys to determine whether the target rates were achieved?
2. Do we seek syndication scenarios whereby a partner would agree to fund thedevelopment of commercials and campaigns for a percentage of revenues?
3. Do we seek to have the advertising agency have some “skin in thegame?”
4. Do we look for those who would partner on a percentage of the revenue?
5. Would it be possible to publish a magazine via a custom publisher anddistribute it to our customer base as a way of marketing our organizationand generating some additional revenue?

Public Relations

1. Should we consolidate our brochures into a few rather than have a largenumber of brochures?
2. Do we write our own press releases?
3. Do we seek free PR opportunities for promoting our business?
4. Do we stretch the impact of our public relations by being a good corporatecitizen, sponsoring teams or working with local schools?
5. How do we rate our public relations agency? Is it getting results?
6. Is there a way to create PR events out of everyday occurrences?

Insurance

1. Are we familiar enough with our insurance policies to determine whichitems are covered and which are not?
2. How often do we challenge third-party providers to reduce our insuranceadministration costs?

Travel and Entertainment

1. Does our business need an individual who is certified as an independenttravel agent so that we may receive discounts on hotel rooms, car rentals,and other travel expenses?
2. Should the company buy or lease an apartment for traveling employeesrather than paying for hotel rooms?
3. Do we have a need for video conferencing? Would that solution help usreduce costs?
4. Is there a policy stating that all travel must be approved in advance andthat travel authorization forms must accompany expense reports?

Facility Costs

1. Have we performed a property tax assessment comparing the cost to build afacility with the current fair market value, and have we sought adjustmentswhen appropriate?
2. Have we ever had an accountant challenge a tax assessment?
3. How often do we evaluate our excess property? Could this property be soldor leased to reduce carrying cost?
4. Have we evaluated the sell/leaseback program?

Vehicle Costs

1. Do we have a program in place for monitoring our gasoline purchases?
2. Are our maintenance costs monitored and controlled?
3. Have we evaluated our company policy to determine whether a car allowanceis better than a company-car program?

Other Supplies and Services

1. Do we need to have armored-car service, or can our managers make thosedeposits?
2. Have we evaluated our armored-car service to determine whether we canreduce the number of pickups?
3. Do we constantly negotiate and renegotiate prices with vendors?
4. Do we constantly renegotiate our prices with vendors to avoid the typical3% annual inflation rate that most vendors demand?
5. Does our business recycle paper?
6. Does our business manage our trash bins to determine whether the bin sizesare appropriate? Can we get by with smaller ones or fewer pickups?
7. Have we evaluated our uniform program?
8. Are uniforms needed?

SOURCE: Excerpted from ProfitBuilding: Cutting Costs Without Cutting People, by Perry J. Judy,published by Berrett-Koehler Publishers. Order by phone at 800/929-2929.