Professional Documents
Culture Documents
94 Ideas For Cost Cost Reduction and Profit Improvement Improvement
94 Ideas For Cost Cost Reduction and Profit Improvement Improvement
The first performance requirement in a business is economic performance. Indeed, the first social
responsibility for a business is to produce a profit adequate to cover the cost of capital and with them the
minimum costs of staying in business. Adequate profitability alone can provide for the risks, growth
needs and jobs of tomorrow.
-Peter F Drucker
Profit Maps
www.profitmaps.com.au
Contact 0437 627 078 or (02) 9920 1916
Email skandak@profitmaps.com.au
SKANDA Kumarasingam
Email skandak@profitmaps.com.au or 02 9920 1916 or 0437 627 078
www.profitmaps.com.au
Page 1
2.
3.
4.
Recycle and reuse. The plastic bags, envelops and other packaging from your suppliers make good
trash bags. Another example is to use standard envelops with boxes printed on the face of these
envelops where you provide information for internal mail circulation. When received, the recipient
can again reuse it to send his or her mail to another internal employer.
How about saving and reusing photocopy papers or printing where there were errors in the
photocopied or printed document. If it does not contain confidential information these wasted papers
can be used for writing or scribbling notes by staff than using new notebooks and notepads. Ideally
stop buying new notebooks and notepads. You save costs and the environment.
Learn to photocopy and print on both sides of the paper. Buy photocopiers and printers that can do
this with ease and bring in a company policy requesting all staff to photocopy on both sides of the
paper.
Insulation for your roof, attic and walls (including outer wall electrical outlets) will absolutely save
you money over time. Much of this, you can do yourself. While you are at it, check the weather
stripping around the doors to the outside; if you can see daylight between the door and frame -purchase a roll of adhesive foam door seal and close those cracks.
SKANDA Kumarasingam
Email skandak@profitmaps.com.au or 02 9920 1916 or 0437 627 078
www.profitmaps.com.au
Page 2
5.
Consider investing in reusable items. Rechargeable batteries are a good option if your battery
consumption is high the question you should ask yourself is: why is your battery consumption high
and what can be done to reduce that?
6. Have a no smoking policy or reduced smoke-time. Many staff members spend a lot of time outside
office in designated smoking areas. Sometimes other staff members accompany them jointly wasting
a lot of productive time.
7. Limit alcohol at company premises and functions. Alcohol is an added expense you may be able to
eliminate altogether, or at least significantly reduce.
8. Stop gambling within your organization such as staff getting together and pooling funds for Lotto and
footy tipping! These are personal acts of staff during company time.
9. Stop using paper napkins and paper towels. Cloth towels are more absorbent and can be used over
and over again. They also clean much better than paper.
10. Think about every purchase before you make it. Ask yourself whether you need it or simply want it.
Do you already own something that will perform the same task? Is it of good quality or needs
replacing after a few uses? Most importantly, are you willing to put off your profit improvement and
cost reduction goals to have it? If an item is superfluous, just say no.
11. Use the 24 hour rule. Wait 24 hours before making the purchase for non-critical items.
12. If you subscribe to non-essential services, like satellite radio, prepare yourself mentally to cancel the
service and then call their accounting department. Advise them that you are cancelling - they will
transfer you to several people but each time tell them the truth - you want to cancel because you
cannot afford the service. If you persist, they will offer you a discount - a substantial discount - to
continue service because it is much cheaper for them to keep a customer than to obtain a new one. If
they won't give you a discount - cancel the service and do without it while you save some money.
SKANDA Kumarasingam
Email skandak@profitmaps.com.au or 02 9920 1916 or 0437 627 078
www.profitmaps.com.au
Page 3
18. When cell phones are provided have clear rules on usage. Any violation of this must be charged to the
employee and recovered from their pay.
19. Consider texting or sending short service messages or e-mails to staff in foreign locations or those
who may be travelling abroad with whom you may want to communicate.
20. Consider using voice over IP such as Skype or gchat from Google. For example Skype charges AUD
4.00 for unlimited calls to any phone or mobile in Australia per month. Whereas Optus charges AUD
109.00 per month for the same privilege.
21. Cable television- consider if this is necessary for your company. Rather than having special cable
television in your lobby it may be a good idea to use preview. Your customers or suppliers who use
your lobby would not seek to view complete shows or movies that are shown on cable television
during their office hours.
22. Understand your traffic patterns and what you spend better than what your telephone
company knows or tells you. Many businesses rely on their carrier to tell them what to do. This is
ill-advised and reflects laziness on the part of the person making the determination. Given the choice,
a telecom carrier will always sell you a gold plated Mercedes, whether you need it or not, on a 50 year
lease, which only increases in cost every year, that you can never get rid of, even after the wheels
have long fallen off. Don't fall for this trap. You make the rules. It's your money!
23. Package your services into something that you can explain to the carrier market in their
terms. Measure service by origination, type, distance, and per unit expense. Roll it all up from perfect
granularity to absolute 100,000 foot level.
24. Identify the minimum level of service that is required to meet the needs of your organization.
This doesn't mean cheap, it means that the combination of services you buy should exactly meet your
needs, being neither greater than, nor less than your needs. You don't have to pay for widgets you
can't use, and you don't want your users to go without services which are critical to the success of
your business.
25. Identify the carriers that provide service in the locations where you originate a need for
service. For instance, it doesn't matter if XYZ carrier has nationwide service to major cities, if your
main city is not on their list. Get market comps from reliable sources. The carriers may be telling you
the best rate is a nickel, while other may be paying a penny, and they will never enlighten you beyond
that which they need to. Other top performing end users probably have the best rate information,
which you can informally exchange. Be sure not to just look at the leading rates that are generally
followed, but look at the entire list of services. Recognize that the largest companies with the highest
volume do not necessarily pay the best rates. They often suffer from ossified contracts that have been
carried forward after far too many "good guy deals" have been cut. Carriers will always be quick to
cite others who are paying more money than you are. Don't worry; they only cite the higher ones,
keeping the ones getting a good deal private.
26. Invite every carrier to compete for your business that has even the slightest chance of winning
your business. Even if its just a single circuit. The more the better. Don't invite carriers who you
wouldn't seriously consider giving business to, which is called using "stalking horses." If you do this,
the market won't respect you. Don't give any one carrier any advantage that every other carrier is not
getting. Make it fair. Use a level playing field. Make everyone compete using the same information,
released at the same time, and under the same rules. Don't give anyone more time than you could
perform within. Open the information from all of the carriers in private, sharing it with the minimum
number of internal people required to do the work. The more people that know of your internal
influences, the more they will share it with the market, and not to your benefit.
27. Set the pace. Your incumbent carrier will use excuse after excuse to slow down the process. Why
should they help you speed the process which will only result in their having to write down part of
the fat profits they are making on your business? This is not a time to get nostalgic. Set your terms,
your timing, and award to the carriers who earn your business. Not in the past. In the present. Once
you have tentatively identified a carrier, make sure to come up with a list of 2 or 3 others that can
also suffice. Never tell any carrier what the outcome is until you have your contracts signed. Its a
SKANDA Kumarasingam
Email skandak@profitmaps.com.au or 02 9920 1916 or 0437 627 078
www.profitmaps.com.au
Page 4
very small vendor community, and your information will be shared (again to your detriment) if you
disclose it before the deal is done.
28. Measure everything and report your margin of success to your executives to they can understand
your performance.
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39. If your heating system works by gas you may be able to speak to your service provider and request a
shut off during the warmer months. This will help you to save on fixed costs. If this is not possible you
may be able to sign up for a pay as you use package.
Electricity
40. Use energy efficient bulbs. Again the government provides many incentives and rebates reducing the
overall costs of these energy-efficient bulbs.
41. Install systems and methods where light bulbs in certain areas are switched off automatically. I have
seen in certain areas where security lights or floodlights are switched on during the nights and
forgotten to be switched off in the mornings. Having a system that switches off the power supply to
these security or floodlights during the day makes the system automatic and saves substantially on
electricity as these lights consume a huge amount of electricity.
42. Request and educate your staff to shut off and switch of all electrical equipment and laptops before
they leave office at the end of the work day. Many people do not switch off electrical equipment and
laptops when not in use. The main reason for this may be convenience to them but not to the
business. Routine checks must be made to ensure that this policy is adhered to. This not only saves on
electricity but also reduces risks of electrical fires when staff is not available to handle them.
43. Request and educate your staff to only use electricity when absolutely necessary. Many offices can
use natural lights during certain seasons and times of the day. This is also true when you open the
window to regulate your internal environment and its temperature.
Water
44. In certain work areas workers have a shower before the commencement of work or after the
completion of work. Where shower facilities are provided use shower reduction kits. Again such
shower reduction kits are provided by the government and if not many incentives are available for
using them.
45. Request and educate your workers to limit shower time.
46. If your toilets and commodes do not have two buttons for half flush and full flush change or install
them. This will save substantial amounts of water during the year or on a long-term basis.
47. Gentlemen's restrooms should be fitted with adequate urinals. This again stops water being flushed
down toilets and commodes.
48. Wherever possible use water-saving cubes in urinals. This is a new invention where you do not have
to use water as the cubes are capable of purifying the environment and urinals by using odour killing
chemicals and bacteria.
49. Use taps which stop automatically after dispersing a limited amount of water. This is a good idea
where you have people washing their hands in public toilets. If more water is required all that you
require is to push a button. This tops excess water usage and leakage.
50. Where possible use waterless hand sanitizers.
51. Repair leaking toilets and faucets.
52. Use mulch and other and water reducing systems for your office lawn such as drip systems and
providing additional shades to reduce evaporation.
53. Reduce the duration of watering and the number of days that you do it weekly.
SKANDA Kumarasingam
Email skandak@profitmaps.com.au or 02 9920 1916 or 0437 627 078
www.profitmaps.com.au
Page 6
54. If your business uses water filled in open tanks, use covers to provide additional shade to reduce
evaporation. Some companies have swimming pools in recreational buildings which may require the
same treatment.
55. Learn to harvest rainwater and save them in huge tanks. You will be able to use this and save a
ridiculously large amount of cash you spend on water.
Entertainment
56. Stop providing free tickets and corporate boxes for many sports events or other at functions and
activities.
57. When senior staff members have food and entertainment allowances fix daily limits.
58. Even when senior staff members may have food and entertainment allowances have clearly defined
policy on how the money can be spent and also for what purposes it can be spent on.
59. Request and educate staff not to order food by delivery or room service.
60. The company must have a system where the staff member first uses his/her personal credit card for
food and entertainment which will then be reimbursed by the company on actual bills. If the staff
member is unable to provide the proper supporting documents and bills or has spent on items which
are not allowed by company policy that payment will be withheld or paid net.
61. Stop buying or rationalize buying the daily newspapers, magazines, periodicals and books for
management and staff to browse and enjoy during office hours.
62. Do not order fresh flowers for every manager in the office. You may use fresh flowers in the main
reception or lobby area and even better if you can use natural looking artificial flowers and flower
arrangements which are kept clean and free of dust.
63. If the company provides annual trips to all members of staff it must be provided on the basis of costs
reduced or profits improved during the particular year. For example you may be able to tell your staff
that if certain costs are reduced by 20% they would be rewarded by this particular company trip. If
this does not happen you do not have to spend that money. However if staff is able to reduce costs as
requested , you win anyways
64. Certain companies have the habit of taking their key management to exotic locations in faraway
places for a few days to brainstorm and develop corporate strategies. Whilst I do not condemn this
great idea it may be best to reduce the cost by having fewer days with a tight agenda and less
travelling to do.
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67. If you're a small start-up company you may be able to buy most of your assets from garage sales or
closedown auctions. Even if you had to spend a little extra on refurbishing and cleaning it up you
would be able to save substantially on them.
68. Another option which most companies consider now is to buy from online auctions stores such as
eBay.com and overstock.com
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78. Less driving of vehicles also saves costs on maintenance, tyres, consumables and fuel.
79. Request and educate staff to change their driving styles to an ideal speed and to be less aggressive in
driving. This again would save on vehicle maintenance, consumables and fuel.
80. Staff who travel long distances should be given special or advanced driving lessons. Accidents happen
which can cost the company a lot of money and staff lives. Put limits on the amount of driving hours
allowed during a 24 hour period.
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91. Over communicate communicate the status of outstanding issues more than you have been.
Nothing makes a customer feel more frustrated than not knowing the status of a support problem or
outstanding request. Keeping your customers and users "in the light" creates a perception of being
more productive and improves client service.
92. Over deliverCoach your staff to take the extra steps in supporting your stakeholders. Little extras
go a long way toward improving service, and higher satisfaction creates an image of responsiveness
and productivity.
93. Publish your team's accomplishmentsYou might be surprised at how much we all forget about
what we accomplish every month. It's so easy to get caught up in the day-to-day issues and problems
that we forget to reflect on the things that were completed in the past. Start tracking your team's
accomplishments and publish the highlights monthly. If we forget what we accomplish, I can
guarantee that the customers don't know all the things we do. Share this knowledge with them, and
you may find that customers really are interested and that their perspective of how busy you are in
your department or business unit goes way up.
94. Before you start trying to improve the productivity of your staff, conduct an assessment to determine
how productive they already are. If possible, establish a baseline and measure the improvements as
you implement specific actions that either improves your team's real productivity or the perception
of its productivity. Capturing real data in key areas will help you substantiate whats really
happening.
Conclusion
The more you understand the power of this list, the more youll realize you must get your hands on all
the other ideas to benefit your business. Go to www.profitmaps.com.au to obtain and use a simple 5
step process that can do this for your business.
As mentioned each idea has the potential to increase your net profit margin by many % points. Research
shows profits increase by 4%-56% and costs reduce by 18%-37% within 2 years. Usually a 5% reduction
in cost is adequate to turnaround most loss making businesses.
To obtain the maximum benefit and ensure that the actions result in improving your bottom-line you
need a structured methodology or a process on an on-going basis such as the 5 step process
suggested in www.profitmaps.com.au.
SKANDA Kumarasingam
Email skandak@profitmaps.com.au or 02 9920 1916 or 0437 627 078
www.profitmaps.com.au
Page 10