Old habits die hard
Old soldiers just fade away
Old habits die hard
Harder than November rain
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Recognize the song? It is called “Old Habits Die Hard” and the lyrics were written by Mick Jagger for the 2004 movie, “Alfie”. It also won the 2005 Golden Globe Award for Best Original Song.
Well Mick was not thinking about business habits when he wrote this song but he might have been. As accountants we often see our clients locked into old ways of doing things – sometimes to the detriment of their business.
An obvious place to look is expenses, especially since even a small reduction in costs directly impacts the bottom line. Here are some examples where old habits may be keeping your business from maximum profitability – and there could be some quick wins:
Choose some suppliers and renegotiate.
It makes sense to pick larger expense items, especially if they are long-time suppliers. A respectful invitation to discuss terms should be welcomed by the supplier – if they value your long-term business.
Put certain contracts out for bid.
This is an extension of (1) above and signals to the market that you are serious about buying on the best possible terms. The best suppliers will work hard to ensure you get those terms.
Buy in larger quantities.
Sometimes larger orders enable discounts but be sure you have the means to store goods. There may be opportunities to collaborate with other buyers to enable larger orders.
Engage your team in cost-cutting measures.
Management may miss cost-saving opportunities. Ask your team to produce savings ideas and let them contribute to the general good of the business. Incentives can work well in this regard.
Lock in long-term pricing discounts.
Suppliers will reward you for the guarantee of continued business, especially where you are buying commodities. Consider a hedging arrangement if you think prices might fluctuate.
Analyse whether wasted material can be reused or sold.
It is likely that some businesses will value what you consider ‘waste’. Increasingly there are web-based platforms which serve as a marketplace for these goods.
Review business processes.
You are probably engaged in certain activities (like production, marketing, finance, procurement) which are resource intensive. A process review may reveal better ways to do this resulting in cost savings through automation or process reengineering.
Maintain an updated vendor list.
A good procurement process requires that decisions on who you buy from are made based on agreed criteria. This is also a matter of financial controls.
As you can see, nothing above is difficult … but the analysis may take time. And you may need to break some ‘old habits’. That means making changes which strengthen the business … but are complicated to implement such as employee downsizing.
Accountants are well-placed to help with this since we deal with the relevant numbers, can perform the analysis and can make actionable recommendations.
Please get in touch to discuss further. And respond to our questionnaire below to discover how you are doing in expense management at present.
Do not get caught in those old bad habits, especially where you can quickly improve the bottom line.
This is general information only. Contact us today for an obligation free chat about you and your business. Follow us on Facebook & Instagram