January 22, 2013

Cutting Overhead Costs Is Easy…If You Follow These Guidelines

By Paul Bieber

In addition to writing this weekly blog, and writing for USGlass Magazine, my partner, Stan Lane and I do a lot of consulting for glass companies.  We help companies, both large and small cut overhead.  It is easy for us as outsiders to ask questions about the ‘sacred icons’ of expense that business owners would never question.  We have never gone into a company where we havn’t been able to cut expenses without hurting any glass operations.  It is just easier to continue paying a small bill monthly, than to ask the questions about why it is being paid.

So, instead of hiring us, here are some tips that will help you cut the non-glass overhead.

  • Question every bill, making sure it is very important to your current business.  You should be signing every check.  Don’t delegate this most important responsibility.  When we were involved with our glass fabricator, we paid bills of roughly $3 million a month, and the owner Chuck, or I signed every single check.  It took about two-to-three hours every other week.  And we knew where every penny went.  Give up some other administrative function you have and place this time in your schedule.
  • Make sure every purchase order matches the incoming invoice…that the pricing is correct; the freight terms are correct and the receiver ticket matches what you are being billed for.  About 5-10 percent of the bills we received were at a different price than on our purchase order.  Maybe a vendor had a price increase, but didn’t send out a notice, or they substituted an item with a higher price.  We argued every one of these and won a huge percentage of these calls.
  • Ask your self if you really need this item in this quantity.  Are you buying a year’s supply to get a slightly better price?  If a 3 month supply might cost two per cent more, but give you a better current cash position, I’d go there.  Make sure your purchasing people know that smaller quantities may be alright if the price differential is small.
  • Reduce the number of your miscellaneous vendors.  Giving more business to one vendor should earn you better prices.  It saves you money in shipping, check processing and paper handling.  
  • It’s also time to make purchasing more consistent.  One kind of ball-point pen for everyone; one brand of coffee for the community pot, and ask folks to throw a quarter or two in to the kitty to help pay for this; Cut down on the magazines (USGlass is FREE to glass shops and fabricators!); reduce memberships in organizations; you get the drift here.
  • Have your insurance broker requote your policies with at least three companies. 
  • Starting a drug testing program will reduce your employee turnover and more-than-likely reduce your workers’ comp insurance in the long run.
  • It may be time to ask advice of other entrepreneur’s in your area.  The best ideas you will get are from your neighbors! (And of course, this blog)
  • Start doing tasks in-house that you currently contract out, everything from cleaning the office to checking on job applicant’s history.  Some things require outside expertise, but ask these vendors to sharpen their pencils.
  • If you lease, ask your landlord for a one-year reduction in rent.  You’d be amazed how well this can work.
  • Clean your office and shop or plant…get rid of all the clutter.  This will improve efficiency all around.  Take all the junk out of your trucks.  Reducing the weight carried in a truck by 500 lbs. will increase your mileage by one MPG.
  • Recycle everything…ink cartiridges to glass.  The more you recycle, the less you have to pay when the dumpster gets weighed.  You may reduce your dumpster pulls to every-other week!

Look at your cost-cutting as if you are an outsider at your company.  Question everything…there should be no situations where, “We’ve done it this way for years, so it continues”.  Good Luck!