How to Cut Operational Expenses / Useful Tips for the Small Business

How To Cut Operational Expenses / Useful Tips For The Small Business

When it comes to cost management, it's the everyday expenses that are most often overlooked by small businesses. Experienced cost management consultants like AMK Associates in New York often start with these overlooked items to give their clients an immediate boost to their bottom line. Here are some simple tips for cutting your operational expenses without compromising quality or reducing your staff:

Office Supplies
* Use generic versus brand names whenever possible. Many brand name suppliers make generic versions of their products, so you won't sacrifice quality. For example, use 3M's Highland Self-Stick Notes instead of their Post-It's notes and save more than 50 percent per unit.

* Always ask for a price break. Most vendors will not quote you their best price unless you ask. So ask!

Equipment Leasing vs. Purchasing

* Buy anything small enough to set on your desk; otherwise, lease it. Leasing gives you the option to upgrade or downgrade, depending on your needs and changes in technology.

* Keep leases under 36 months. Buy smaller equipment such as fax machines and printers (Brother and Epson are great); while their prices constantly drop, the technical capabilities do not change significantly.

Messenger Services

* Analyze where your packages are being delivered

* Then, negotiate a broader delivery range and pay a fixed price.

Equipment Insurance

* All leasing equipment companies automatically charge for insurance, even though your current policy may already cover it. Register your leased equipment with your insurance broker so it can be added to your current policy.

* Then request a Certificate of Insurance (COI) from your broker, and submit it to the equipment leasing company. Otherwise, you will double your insurance charges.

Shipping

* Handle shipping costs on a case-by-case basis. Know the shipping policies of each vendor and choose the best vendor for each item to be shipped.

* For instance, if the weight is not stated on a package, some shipping companies will charge customers for a five-pound parcel. To avoid this, preprint air bills with one pound, and most vendors will adjust the poundage if the package weighs more or less.

Printing

* If your letterhead text won't change the same for a six-month period, print in bulk. It saves both money and time. Don't worry about storage; most printers will store the inventory and ship at no additional cost.

* If your printer won't store it for free, negotiate storage and shipping into the overall price of the print job.

Telecommunication

* If your total telecom costs for both voice and data are $3,000 or more, consider a T-1 connection. While you will be charged a recurring monthly fee, your per-minute rate will be significantly lower.

* Check to make sure your phone company is charging you in six-second increments. If not, you will pay for a full minute for every fax you send, even though it transmits in seconds.

Service Contracts

* Don't automatically get costly service contracts for every piece of equipment. You may find it more cost-efficient to simply pay for time and materials; even as much as $175 per hour if repairs are necessary.

* Some service contracts are advisable, but be cautious. For example, most telecommunication contracts include the PBX (console), as well as each individual telephone. Though it is advisable to insure the console, there is little need for insurance coverage on the phones.

The Bottom Line

By making these minor purchasing changes, you can cut your operational expenses significantly. Cost management consultants can uncover additional savings by analyzing other expense items, designing more efficient systems and aggressively negotiating with vendors. It's tedious, meticulous, detailed work that many small business owners and managers would rather avoid (much like filing income taxes). But just like income tax filings, business owners can offload the work to experienced cost management consultants to keep their focus on running their businesses and maximizing their bottom lines.

Arleen Kahn is founder and president of AMK Associates (www.amkassociates.com), a New York City-based cost-management consulting firm. For more information on how you can impact your bottom line through cost control, contact Arleen at 1-888-345-8008 or amk@amkassociates.com.