Managing Corporate Costs in these Tough Economic Times

Over the past 6 months we have helped a number of our clients in the following areas: operating cost reduction and process improvement.  If you have not done so already, this is the window of time to get your company’s house in order, so when the economy turns your company net profits will be increased.

Operating Cost Reduction

Annually, most companies determine their next year’s budget. During this process it’s important to analyze your cost structure by evaluating current policies and highest operating expense accounts as a percentage of revenue.  By grouping related chart of account operating expenses, such as travel (airline, train, hotel, mileage, etc,), companies can easily consolidate their P&L statement to create a priority list (top 10 operating expenses). Besides salaries, benefits and corporate insurance are usually in the top 10.  Companies should annually sit down with their HR benefit firm to determine the best cost vs. benefit alternatives, while ensuring the current benefit program is in line with industry competitors. In addition, companies should meet with their corporate insurance broker to make sure adequate policy limits are in effect, changes to corporate structure and operations are reflected, and that your company has obtained all the possible credits (i.e. alarm system, sprinkler system, etc.).  In regards to other operating expenses, understand the details of each group and either negotiate with your current vendor for better pricing or obtain free add-on services; or issue a request for proposal (RFP) to obtain competitive qualified bids.

Process Improvement

The best way to review your current (As-Is) company processes is by documenting them in a pictorial diagram taking into account other related departmental tasks and timeframe of each task.  This process will allow you to identify areas of improvement.  Improvement can be in the form of time, resources and cost.  Improvements can be achieved through one or more of the following: system enhancements, re-engineering tasks, or segregating tasks for internal control procedures.    Once these improvements have been identified and a step by step action plan has been documented to implement these improvements, a future (To-Be) process diagram should be created.

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