Three Overlooked Business Costs
These are the indirect business expenses organizations should keep in mind when looking to control their operation costs
Money in, money out, and hopefully some left over for profit and reinvestment. The revenue piece is straightforward, directly related to products or services sold. The expense lines can be complex, as costs are broken down into sections and subsections for better analysis of the cost of doing business.
“When costs get proportionately high compared to income, spending gets scrutinized. Many organizations keep a keen eye on their direct operational costs and overhead, and don’t consider their indirect costs,” says Bhavik Chauhan, director, western region, with Ayming, an international business performance consulting group. “The big-ticket items, often staffing or inventory, can seem like the easiest place to start chopping, rather than nickeland-diming a number of expenses that appear to be fixed costs.”
Organizations of all sizes can benefit from taking a fresh look at indirect costs associated with their business, and how these costs impact their bottom line. Here are three places to start looking:
1. Wireless
This is an area for many companies that has grown quickly and become more of a hot topic as expectations around responsiveness change. Not to mention, it has become critical for more staff categories to have cell phones and laptops. With complex packages offered by service providers, it can be a moving target for contract managers to identify the right service bundle to meet the organization’s changing needs. Common issues include paying for services not required, paying for too much data, and inadequate coverage for roaming charges and long distance fees.
2. Car Fleet
Keeping a business moving forward often includes a range of vehicles for employee use. Organizations are well aware of price range per vehicle by employee category and financing, but may not factor in all aspects of the total cost of ownership, such as insurance and the always-influx fuel consumption. Vehicles purchased in the same price range and category can vary greatly for operational costs. To this end, an organization would be well advised to also consider depreciation and maintenance to optimize fleet costs.
3. Real Estate
Some business sectors may do well to have a physical presence in a particular area of town, or downtown. Soaring costs of square footage may force another look at the cost of where you do business: if the address is necessary, do all the employees need to be there? Organizations might want to take a look at offering remote work options to segments of their workforce. The ongoing development of new technologies makes telecollaboration much easier to implement at work as well as at home. Remote work does have issues to be addressed, such as equipment needs, privacy of information and monitoring performance, but for some businesses, it is an attractive tradeoff for lower real estate costs.
The bottom line is affected by both income and expenses, and boosting that final number doesn’t necessarily mean increasing sales. Cutting costs may be the easier route to staying in the black, which in turn can support businesses to achieve their objective faster, with greater profitability.