Ozarks Capital Funding

During a recessionary period like we’re in now, it is necessary to take a good hard look at the outflows and expenses that your company incurs. Many business owners, however, don’t do the proper analysis of expenses and randomly cut costs in areas that could come back to bite them.

It is important to look at every group of payroll expenses and eliminate those positions that do not fit with the current state of affairs. For example:

• During a period of declining revenues, can the company adequately service customers needs with less salespeople?
• Would it be more cost effective to cut some production employee positions?
• If sales volume picks up in the short term, would it be better to utilize existing employees and pay overtime rather than hire temporary workers?
• Can some administrative staff be cut without threatening internal controls and information systems?

Other expenses should be looked at on a line item by line item basis, but I caution the business owner not to arbitrarily cut some expenses without doing a thorough cost-benefit analysis. In particular, advertising and marketing expenses come to mind. Slashing the advertising budget can worsen the situation by driving revenues and profits down further. Depending on your company’s product or service, maintaining or even slightly increasing advertising expenditures can bolster the profit margin and increase market share in the future.

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