Cash Flow Cost Reduction Tactics in Perth

Cutting costs can be a quick and easy way to improve the profitability of your business.  Introducing cash flow cost reduction tactics in Perth into your cost control measures can bring immediate savings and ensure you remain profitable in the long term.

But it’s important that your cash flow cost reduction tactics in Perth are carefully managed.  Eliminating errant expenses is clearly beneficial, but indiscriminate cost cutting could lead to a drop in quality or poor morale if staff fear being made redundant or are not given the tools they need to do their job efficiently.

This risk is heavily reduced by identifying where you can safely trim costs, setting clear cost reduction targets and researching any cost saving initiatives before making changes to your business.

Planning for effective cost control

The first step towards reducing costs with cash flow cost reduction tactics in Perth is identifying your major cost centres.  These are likely to include:

  • Production
  • Purchasing
  • Sales and marketing
  • Financing
  • Administration
  • Facilities maintenance

Start by assessing your profit and loss statement for the last six months and rank all your expenses from highest to lowest, working your way down the list and identifying areas where you can reduce costs.  It’s a good idea to first focus on identifying cost saving measures in areas where you’ll see the biggest return.  For example, it’s wise to work toward saving 5% on a $200,000 expense rather than a slightly higher percentage on a lower cost expense.

Trial new ideas

You might find it difficult to anticipate savings without actually implementing new systems and processes.  Remember that any changes you make do not need to be permanent.  If you are not sure whether cash flow cost reduction tactics in Perth are suitable for your business, consider trialling it for a few months then assessing the results.  This way, you’ll soon get an idea of the real cost savings without having to commit long-term to new processes or changes.

Any new processes or changes should be benchmarked and frequently revisited to ensure they are still suitable for your business.  Consider asking staff for feedback about any changes to make sure there are no hidden problems that could be costing you more than the cost saving value.

If you are in doubt about any potential changes, consider seeking professional advice from an accountant, industry association representative or business mentor regarding cash flow cost reduction tactics.  Contact Us, we can help.

Quick savings

You might be surprised to find that significant savings can be made without having to worry about your quality and performance being affected.  Here are the most popular ways to implement cash flow cost reduction tactics in Perth to trim costs without making radical changes.

  • Eliminate unnecessary costs – start with waste reduction, heating costs and utilities charges.
  • Reduce inefficiency by identifying manual tasks that could be computerised or completed less frequently.
  • Avoid frequent, small orders that cost more than larger orders and take additional time to complete.
  • Reduce travel expenses by booking air travel earlier and using cheaper accommodation on business trips.
  • Find alternatives to high priced suppliers or negotiate better payment terms or discounts on purchased goods.
  • Revise your credit policies to encourage prompt payment.
  • Brainstorm quick cost savings ideas with your staff – they might have some useful suggestions you may have overlooked.

Significant savings

Once you have identified your major cost centres, you may want to investigate potential ways to save money and implement cash flow cost reduction tactics in Perth by changing existing processes.

Some of the most common opportunities are listed below, but before adopting any changes you should be aware of any potential damage to your core business activities.

  • Cut payroll costs by outsourcing non essential activities.
  • Redesign your existing processes to eliminate duplication and cut time wastage.
  • Make use of current technology or latest industry thinking.
  • Agree to long-term supply contracts or guarantee a minimum purchase amount to secure better terms.
  • Trim back or revise your current product offering and remove poor performing products.
  • Form strategic alliances with other businesses to buy larger volumes.
  • Consider subletting office space or relocating to a more cost efficient location.

There may also be other costs such as long-term, fixed rate business loans or fixed price contracts for raw materials that you may be able to reduce when these are up for renewal or tender.

Pitfalls to avoid

Reducing costs can have a negative effect, so you’ll need to be sure that changes will not compromise your operational performance.

Some common pitfalls include:

  • Over dependence on one supplier could put you at risk if your supplier fails.
  • Reducing your marketing budget could affect your marketing strategy.
  • Tighter control of business finances could leave you without a safety margin if cash flow becomes tight.
  • Cutting short-term costs such as training, research and development or advertising can lead to long-term weaknesses.

Employee costs

Reducing employee related costs is generally risky and counter-productive in the long-term.  Reducing costs such as staff training or meeting times could lead to poor staff morale and reduced productivity.

Changing an employee’s terms and conditions can also create legal issues in some circumstances, so it’s always a good idea to obtain expert advice before making a decision.  Making employees redundant could bring short-term costs and the risk of possible legal proceedings.  It may also contribute towards low morale.

These problems can be minimised by maintaining clear communication with employees.  Introducing cash flow cost reduction tactics in Perth through improved practices and procedures will require a degree of employee ‘buy in’ so it’s important that your employees are aware of why you are making changes. Employees may need additional training and support over these periods.

Next steps

  • Schedule a staff meeting to review your costs and brainstorm ideas about possible saving measures.
  • Commit to an ongoing cost control and monitoring process (or delegate key staff to manage the process).
  • Ask your accountant to assist you with cost saving initiatives or brainstorming ideas.

If you need help with your business or are experiencing cash flow problems in Perth, call us today on 9204 3733 or  Contact Us – we will be happy to help.  We can offer our Management Consulting service which our clients find very valuable in tackling cash flow problems.

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