Is there a simple remedy for rising business overheads?
Poor cashflow will undermine any business and it is essential that a firm has a strategy to manage its costs in place.
A survey of 500 bosses by Heathrow Express last year found that 35% were losing sleep over challenges to their business. The report authors concluded that there would be an annual boost to the economy of £580bn if these problems could be resolved. The two main causes of this insomnia? The future of the economy; and rising business overheads.
In the simplest of terms there are three steps to follow.
Firstly, a sensible analysis of the costs a business is incurring relative to its business plan will determine which are vital, discretionary or simply expendable.
Once that review has been undertaken the key is to then get good value.
Finally, businesses need to remain vigilant and on top of both their expenditure and industry developments after their review, because otherwise costs will simply creep back in again. In fact, 95% of simple cost reduction exercises fail because firms do not have a cost management strategy in place, with the result that all those benefits and savings initially identified and implemented slowly find their way back into the business.
Strategic cost management takes time, and expertise, and with the current uncertainty about the economy could play an important part in the continued success of a business.
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Blog provided by Mark Bennett, Cost Management Consultant, Auditel
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