Improving the Bottom Line

by Dr. George Matyjewicz

Here are 16 simple, common-sense tactics for cost savings that go directly to your bottom line!

Over the years, we have helped many companies grow profitably, using simple, common-sense tactics for cost savings that go directly to your bottom line! And it’s the little things that count - a ten percent increase in profit is more likely to come from twenty things that contribute one-half percent each than from one thing that gives you the full 10 percent.

Here are 16 tips to help you cut accounting and administration costs.

1. Improve Collections. This tip comes from my partner (both life and business) Phyllis. Rather than wait for a bill to be past due, call the customer the day before the payment is due to be certain they received your invoice and that it is scheduled for payment. If they haven’t received it, tell the you will fax it to them immediately. This trick alone is how she has improved collections from 120+ days past due to 45 days (94% current) at a major importer.

And deposit daily! Take advantage of the short-term interest on your deposits.

2. International Payments. While it takes an average of 42 days to collect payment from U.S. companies, it is much slower in other countries. The average days outstanding on receivables in other countries: Iran 310; Syria 175; Kenya 143; Ethiopia 138; Argentina 121; Uruguay 120; Tunisia 116; Chile 109; Ecuador 107; Cameroon 106; Morocco 105; Algeria 103. So, if you do business there, you better adjust your prices to reflect these slow collections.

3. Accounts Payable. With each vendor, work out an agreement to delay payments or spread them out. A long payout over one year can be secured by a note and will reduce your accounts payable on your balance sheet (it goes under long-term obligations). This improves your working capital position, which makes your lenders or investors happy.



4. Improve Cash Flow. By improving cash collections and delaying cash payouts you have improved cash collections. Let’s look at an example. Assume your sales are $3 million and you have 120 days in accounts receivable, or $986,301. Improve it to 45 days and you reduce it to $369,863, which is a cash flow improvement of $616,438. If you delay payments to vendors to 45 days instead of 30, you could improve cash flow another $123,287 on payables of $1 million. That means you have improved cash by $739,726!

And, if you still need to improve cash, consider factoring your receivables, which is very common in the fashion industry. If you sell to customers who have good credit, you borrow against the receivables or sell them outright.

5. Save Pennies. Reduce costs wherever you can. With a business, you have five major areas of costs: 1) Labor; 2) Rent; 3) Inventory; 4) Equipment; 5) Marketing. Save on the operation costs like rent and equipment, and you have more to spend on the things that make you money – inventory and marketing.

Before you spend a lot of money on fancy offices, fixtures or state-of-the art technology, consider other, less expensive ways. Fixed expenses don’t make you money!

6. Reduce Cost Of Your Office Supplies. Go through your past invoices and highlight the office supplies that make up 80% of total dollars spent. You should focus on only the top 20%--those items you always need to have on hand. Then, contact three vendors and get bids on those specific items. Let them know you're shopping for the best deal. If you include a superstore (i.e., Staples, Office Max, Office Depot) in your survey, account for the costs of an employee's time to get the supplies.

Compare prices with online or mail-order companies. Ask questions: What is the minimum order allowed? Who pay the freight charges? Do they have an 800 number to place orders? Who pays the return freight if there are problems?

Centralize the purchase and location of office supplies to improve inventory control and reduce redundant purchases. Work with your supplier to develop "just in time" inventories where the supplier manages the inventory and restocks as needed. Often, orders can be delivered within a day.

7. Telephone Control. Make sure you are getting six-second increment billing with no minimum per call. Some long-distance carriers will charge you a full minute even if your call is only 18 seconds in duration. The shorter your average call, the more you'll save by having six-second billing. With voice mail and faxes being so common, the average call is getting much shorter. Studies have shown that six-second billing can save you around 10 percent on your long-distance bill. Competition with telecoms is becoming fierce. Some are now using the mobile telephone billing concept - flat fee for "x" minutes anywhere.

If you have more than a dozen telephone lines, you may be able to save money going to a system that uses trunk lines and shares them among different facilities. Rather than pay separate charges on each telephone line, this allows you cut line charges.

8. Your 800 Number. Consider a toll-free telephone number for customer service or to tie locations together seamlessly. For example, let's say you are a software company with sales in one location, support in another and administrative in a third. Rather than give customers three different telephone numbers, give them an 800 number, which offers a menu for them to select and redirect the call. When we first implemented such a system, we learned the differences in costs were quite significant.

When negotiating for an 800 number, a critical question you must ask is whether or not you "own" your 800 number. In May '93, the U.S. FCC enacted a regulation allowing the customer to keep the same 800 number when switching to another long-distance company ("portability"). If you move, your number goes with you. The telephone sales rep should ask you to sign a "Resp Org" (Responsible Organization) form, that is required to be submitted, turning the management of your 800 number within the 800 database entity over to a long-distance company.

Read the Next 8 Tips >>

George Matyjewicz, PhD is Global Strategist of GAP Enterprises, Ltd. http://www.gapent.com His dissertation “Just In Time Payments And The New Global Currency For Conducting Business In A Global Economy” was compiled from 3+ decades experience in the business world. He was formerly President/General Manager of a global digital currency company with customers in 190 countries and Chief E-Commerce Officer for a global giftware company. He was a Principal/Partner at a top 20 U.S. CPA/Consulting firm. He is regularly published as an expert on global business, finance, technology and implementation and writes and publishes E-Tailer’s Digest which reaches retailers in 50+ countries worldwide. http://etailersdigest.com 

 
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