LALI Business Consulting Pty Ltd

Buidling better business for today and the future

Cost cutting as strategy? Don’t cut corners

Why cost cutting?

The economic and market conditions are tough for some time now and many expect this trends to continue in the near future. Many businesses are struggling compete and survive. And they are responding to these conditions with cost cutting measures to maintain profit margin and to survive in the market place.

How to cut costs?

Care should be taken when implementing cost cutting strategies to maintain or improve profitability of the business. Cutting corners to gain short term performance will have long term affects on the business and could well damage the corporate infrastructure and culture.

Understanding the type of costs and their nature is critical when implementing cost cutting strategies. A proper financial & non financial analysis of the costs will help businesses identify and understand their inefficiencies and focus areas for cost cutting. Business should conduct a “want v need” of their current costs.

Cost types

1. Fixed costs and variable overhead costs.

2. General administration costs (Administration, HR, IT, Facilities, Purchasing, R&D etc.).

3. Marketing, selling and distribution costs (Marketing, selling, after sales, advertising, freight costs etc.).

4. Debt servicing costs.

Develop and adopt a dashboard reporting system of for the KPIs for cost cutting strategy you choose to implement and build a cost awareness culture. Bench marking techniques will also help implementing this strategy and employ best practices with in the business.

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This entry was posted on 14/02/2012 by in General.

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