Cost Optimization Plan
Posted: Sun Dec 22, 2024 8:48 am
It is a mistake to think that optimization is simply a switch to cheaper products for work or a refusal of some services. In this way, you are unlikely to be able to increase the efficiency of the company, but will simply lose the quality of your services or goods.
The goal of cost optimization is to reduce costs while maintaining high quality service. That is why a large-scale study and comprehensive analysis of the organization is conducted to find those aspects that need to be revised in the company's work.
We recommend setting aside at least several weeks, or taiwan business email list even months, to optimize business expenses, because it takes time to implement serious changes. Start with a clear and step-by-step plan for implementing a new system of work for the organization:
Summary of expenses
To understand which costs are worth cutting, you need to see the whole picture - where does the company's money go? Accounting reports and statistics will help you with this. Raise all the information for the last six months of the company's work. Put everything in convenient tables.
Summary of expenses
Source: shutterstock.com
To make this work go faster and better, use data from CRM systems or other electronic databases of the company. Have all the data on the conducted monetary transactions on hand, from where it will be clear what expenses and incomes the business has.
Categorization of expenses
In the case where the company does not have a cost and income accounting system, it is necessary to do this independently, combining costs into groups or categories. Let's assume that it periodically purchased certain equipment for the operation of the enterprise, such as computers, printers, etc.
These costs can be combined into the category “Equipment purchase” . This way, in the process of optimizing the company’s expenses, you will have different key areas where the budget is spent: rent payments, taxes, advertising campaigns, salary payments, and so on.
Recommendation : Reflect any purchase within the budget in a specific reporting item, this will make the analysis much easier.
Increase Your Profits by 10X: 5 Key Metrics You Must Track
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
After working with over 300 online projects , I can guarantee: monitor these metrics weekly and your company will not only survive, but also increase its profits by 10 times!
In the context of sanctions and crisis, knowing the ROI of your advertising decides whether your business will be successful. Tracking these 5 critical indicators is the key to your prosperity.
What you get for free:
5 Key Metrics to Increase Profits by 220%
Advertising Channels Efficiency Calculator: Optimize Your Budget and Increase ROI by 70%
A Killer Commercial Proposal Template That Increases Conversion to Deals by 60%
We have prepared all the documents and templates with formulas for you. And yes, it is FREE:
Download documents for free
Already downloaded
153115
Segmentation of company expenses
In business, two categories of costs can be distinguished, which will significantly affect the process of optimizing costs and expenses:
Fixed costs are a category of expenses that are not affected by productivity or other external factors. This includes rent, salaries, taxes and fees that are paid regularly, regardless of the financial situation in the business.
Variable costs are those that are affected by how many goods were sold or services were provided by the company. For example, include the budget for consumables here.
By dividing into these categories, you will have an understanding of the whole picture of the company's budget, which means you can better manage your money. An example of cost optimization in this case might look like this:
To optimize constants, you can reduce staff or review the lease of unclaimed premises. Things are much easier with variables: choose other suppliers, review the range of purchased consumables, agree on installments or post-payment for some obligations.
Allocating significant expenses from the budget
Among the above groups, determine which expenses are the largest. Perhaps a large part of the budget goes to employee salaries or to payments for renting warehouse space, for example. You will hardly be able to eliminate them completely, but you can certainly optimize the reduction of expenses. For example, compare different offers for renting warehouse space; perhaps you will find an option from other tenants at a much lower cost, or even in installments.
The Pareto law is a good fit here, where you put in 20% of the effort relative to the major costs to get 80% of the result, that is, to speed up the optimization process.
Detailed analysis of budget expenses
Once you've optimized your major budget expenses, move on to analyzing the rest to find more solutions:
Is it possible to eliminate this cost item?
What is the probability of minimizing these costs?
What is the maximum amount by which these expenses can be reduced?
As a result, you will do a huge and significant job for the company: you will see how things are with the financial situation of the business, you will find even more accessible and interesting offers from other suppliers and contractors.
The goal of cost optimization is to reduce costs while maintaining high quality service. That is why a large-scale study and comprehensive analysis of the organization is conducted to find those aspects that need to be revised in the company's work.
We recommend setting aside at least several weeks, or taiwan business email list even months, to optimize business expenses, because it takes time to implement serious changes. Start with a clear and step-by-step plan for implementing a new system of work for the organization:
Summary of expenses
To understand which costs are worth cutting, you need to see the whole picture - where does the company's money go? Accounting reports and statistics will help you with this. Raise all the information for the last six months of the company's work. Put everything in convenient tables.
Summary of expenses
Source: shutterstock.com
To make this work go faster and better, use data from CRM systems or other electronic databases of the company. Have all the data on the conducted monetary transactions on hand, from where it will be clear what expenses and incomes the business has.
Categorization of expenses
In the case where the company does not have a cost and income accounting system, it is necessary to do this independently, combining costs into groups or categories. Let's assume that it periodically purchased certain equipment for the operation of the enterprise, such as computers, printers, etc.
These costs can be combined into the category “Equipment purchase” . This way, in the process of optimizing the company’s expenses, you will have different key areas where the budget is spent: rent payments, taxes, advertising campaigns, salary payments, and so on.
Recommendation : Reflect any purchase within the budget in a specific reporting item, this will make the analysis much easier.
Increase Your Profits by 10X: 5 Key Metrics You Must Track
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
After working with over 300 online projects , I can guarantee: monitor these metrics weekly and your company will not only survive, but also increase its profits by 10 times!
In the context of sanctions and crisis, knowing the ROI of your advertising decides whether your business will be successful. Tracking these 5 critical indicators is the key to your prosperity.
What you get for free:
5 Key Metrics to Increase Profits by 220%
Advertising Channels Efficiency Calculator: Optimize Your Budget and Increase ROI by 70%
A Killer Commercial Proposal Template That Increases Conversion to Deals by 60%
We have prepared all the documents and templates with formulas for you. And yes, it is FREE:
Download documents for free
Already downloaded
153115
Segmentation of company expenses
In business, two categories of costs can be distinguished, which will significantly affect the process of optimizing costs and expenses:
Fixed costs are a category of expenses that are not affected by productivity or other external factors. This includes rent, salaries, taxes and fees that are paid regularly, regardless of the financial situation in the business.
Variable costs are those that are affected by how many goods were sold or services were provided by the company. For example, include the budget for consumables here.
By dividing into these categories, you will have an understanding of the whole picture of the company's budget, which means you can better manage your money. An example of cost optimization in this case might look like this:
To optimize constants, you can reduce staff or review the lease of unclaimed premises. Things are much easier with variables: choose other suppliers, review the range of purchased consumables, agree on installments or post-payment for some obligations.
Allocating significant expenses from the budget
Among the above groups, determine which expenses are the largest. Perhaps a large part of the budget goes to employee salaries or to payments for renting warehouse space, for example. You will hardly be able to eliminate them completely, but you can certainly optimize the reduction of expenses. For example, compare different offers for renting warehouse space; perhaps you will find an option from other tenants at a much lower cost, or even in installments.
The Pareto law is a good fit here, where you put in 20% of the effort relative to the major costs to get 80% of the result, that is, to speed up the optimization process.
Detailed analysis of budget expenses
Once you've optimized your major budget expenses, move on to analyzing the rest to find more solutions:
Is it possible to eliminate this cost item?
What is the probability of minimizing these costs?
What is the maximum amount by which these expenses can be reduced?
As a result, you will do a huge and significant job for the company: you will see how things are with the financial situation of the business, you will find even more accessible and interesting offers from other suppliers and contractors.