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Tips to control cost in organization

CMA Jitendra Singh , Last updated: 15 October 2008  

  • Review the number of internal reports that your company generates and find a way to eliminate them. Better yet, eliminate routine reports entirely: Reports should often show only critical exceptions, not routine information.
  • Consolidate products that conflict or compete with each other in the market.
  • Drop out of trade associations that have high membership dues and low perceived value.
  • If you have several field offices that do the same type of work (such as call centers or maintenance crews), and consolidation of the offices isn't appropriate, compare the way each office does the work. Identify the most efficient practices and implement them at all the field offices.
  • Look for opportunities to eliminate positions when employees leave or retire.
  • Hire temporary employees instead of permanent ones, particularly when demand for your product or service is high but the future is uncertain.
  • Employ college interns where feasible.
  • "Benchmark" your company's performance against your competition in a number of areas; for example, revenue (or better yet, profit) per employee. But don't browbeat your employees with the numbers. Instead, find out what your competition is doing to outperform you, and then implement those practices at your company.
  • Ask all of your employees -- managers and staff -- to come up with cost reduction ideas on a regular basis. Reward and implement their ideas. That's where some of the best, most innovative, expense reduction and cost control ideas come from.
Human Resources
  • Contract out the payroll processing function.
  • Examine the possibility of self-insuring dental or optical coverage.
  • Offer a managed-care insurance option to reduce the cost of employee benefits.
  • Consolidate human resource or training functions in the field where appropriate.
  • If times are tough or cash is tight, consider providing additional days off to employees as a partial or full substitute for raises.
  • Streamline the approval process for hiring, transfers, and performance appraisals.
  • Employee performance appraisals are generally more effective if held on a quarterly or semi-annual basis, rather than annually.
  • Reduce duplicate paperwork and manuals, such as duplicate human resource policy manuals.
  • Audit your invoices. Insurance, medical, legal, and accounting bills often contain errors and overcharges.
  • Use well-located lockboxes to receive incoming checks.
  • Decrease the amount of time between when the product/service is provided and when the bill is sent. Consider billing in advance where appropriate.
  • Institute -- and enforce -- late fees and interest charges on delinquent payments.
  • Encourage employees to use credit cards instead of obtaining cash advances.
  • Invest cash overnight where appropriate.
  • Constantly review whether services currently performed in-house would be more cost-effective if contracted out -- and vice versa.
Administrative Expenses
  • Maintain control of office supplies. By keeping supplies under lock and key and giving one employee responsibility for the supply cabinet, companies have reduced costs by as much as 50 percent.
  • Buy used office equipment and furniture, instead of new.
  • Negotiate for telephone, gas, electric and other utility services. These businesses, which used to be monopolies, are becoming increasingly competitive.
  • Coordinate the use of overnight delivery services. Employees often get into the habit of using expensive overnight delivery, where 2-day or even U.S. Mail would be more appropriate.
  • Centralize responsibility for purchasing office supplies.
  • Review who is subscribing to what publications in the office, and consider eliminating unnecessary or duplicate subscriptions.
  • Consider rewarding employees for excellent attendance if absenteeism is a problem.
  • Use videoconferencing or teleconferencing instead of face-to-face meetings where possible.
  • Buy frequent flyer miles from your employees and use them for business travel, thereby sharing the savings.
  • If local hotel costs are high, consider obtaining a corporate apartment.
  • Consider reducing the frequency of janitorial services (from every day to every other day, for example).
  • Sublet excess office space.
  • Eliminate the medical services facility at corporate or field offices where there are few workplace safety or injury problems, and a medical clinic is located nearby.
  • Share the savings with employees when they find errors on medical bills, travel invoices, or other business expenses.
  • Consolidate purchasing where possible. For example, have one person coordinate the purchase of all office supplies in order to take advantage of bulk discounts.
  • Negotiate a "most favored nation" clause with suppliers, so you are guaranteed that the price you pay is no higher than other customers (or customers of similar volume) pay.
  • Confront suppliers, and re-bid the order where appropriate, when suppliers announce a price increase.
  • Negotiate penalties with suppliers for delays or poor quality -- and, if cost-effective, include bonuses for high-quality or ahead-of-schedule performance.
  • Implement "just-in-time" inventory for your business.
  • Buy in bulk. Consider forming an alliance with other purchasers to obtain bulk discounts.
  • Establish standard minimum and automatic reordering quantities for routine items.
  • Provide automatic drawing and drafting equipment to engineers to prevent manual drafting and tracing of drawings, and to avoid the loss of key engineering documents.
  • Use paralegals and law clerks for routine legal duties, reserving lawyers for more complex legal matters and representation at legal proceedings.
  • Provide legal training to non-legal personnel, so that all employees understand the legal consequences of their actions and thereby avoid costly lawsuits.
  • Insist on detailed billing from your lawyer. (This is, verbatim, the invoice that was submitted to a large utility company by its law firm: "Work on the XYZ case during the month of November: $127,233.14.")
Information Systems
  • Transfer most data entry functions to the field to eliminate duplication. For example, instead of having employees submit written timesheets which must be entered into the system, have employees enter their timesheet data directly into the system.
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CMA Jitendra Singh
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