General Business Practices
Part 3 of a 3 part series
Warning Signs: PROFITABLITY/EXPENSE CONTROL
- Falling profits (before owner’s compensation).
- Rising expenses.
- Cost of goods sold.
- Operating expenses.
- Decreased gross margin
- Significant adverse deviations from budget.
- Significant increase in a particular line item’s cost.
Steps to Improve: EXPENSE CONTROL / CUTTING COSTS
- Open the bank statement and skim transactions, or control by budget exception.
- Limit expense authorization to upper management.
- Limit check signing to a person who controls cost, but does not do bank reconciliations.
- Secure current bids for all major expenditures (and update).
- Value management cutting costs, increasing value, getting more competitive.
- Profit is a state of mind.
- Monitor departmental budgets.
- When cutting costs, pay more attention to repeat costs than one-time costs.
- Make everyone responsible for cutting costs/increasing productivity.
- Form an internal cost-cutting committee to trim waste.
- Eliminate unproductive meetings.
- Don’t be afraid to downsize in hard times or when sales shrink.
- Scale back retirement plan contributions.
- Guard against losses from employee theft.
Steps to Improve: OTHER
- Keep your assets liquid.
- Shield your personal assets from creditors.
- Checklist – Perform an operations audit to improve operations.