Are your Employees an Expense?

How do you view your employees?

Are they a cost of doing business as they decrease your bottom line? When cutting expenses, is that the first thing you think of reducing?

For large labor intensive operations, this might be the case. However, Entrepreneurs might want to view this differently.

If you train your people properly and motivate them adequately, your employees could actually improve your bottom line by increasing revenues, improving productivity or even reducing costs.. View your employees as assets – invest in them to get better results.

It takes a different mindset to get the best out of your people. If you think of them as an expense, then chances are that you don’t always get the most out of them.

Do the Right Things! Invest in your people and help them add to your bottom line.

Ravi Patel

http://www.patelCFOservices.com

Letting People Go

One of the most difficult things for an Entrepreneur to do is letting people go, especially ones hired in the initial stages of the company.

The slow-down in the economy, budget cuts, tight cash flow situations and so on require Entrepreneurs to take drastic measures for the survival of the company. In this situation, the employees that are retained are ones who are multi-faceted and can handle varied responsibilities. Long term employees, though good performers, have to be let go to consolidate jobs and streamline the organization.

Entrepreneurs need to make reduction-in-force decisions based on the continuing needs of the company rather than past loyalty and emotion.

Spock, in the Star Trek series, has a famous line, “.. for the benefit of the many, a few have to suffer.” Entrepreneurs should heed to that thought.

Ravi Patel

 

Mitigating Risk versus Reducing Costs in the Supply Chain

Reducing the cost of goods and services is an important goal for every business, especially in a competitive environment in a depressed market. Entrepreneurs should strive to improve gross margins by reducing their costs, but is this always the right focus?

Mitigating the risks associated with your critical supply chain, whether for procuring raw materials or goods or employing people who provide services, is more important in the long term than just reducing costs.

While one might be successful at lowering costs through tight controls, wage freezes, and aggressive negotiations, if the risks inherent in procuring such goods and services are not mitigated, there is no assurance that you would continue to receive such, regardless of cost. Short-term cost reductions might be replaced by higher replacement costs if the original supplier of the goods or services is incapable of delivering them or choses not to.

Entrepreneurs need to work with their supplier of goods and services (including employees) to find ways in reducing  risks for continued and reliable delivery of quality products and services for the long term. Foregoing short-term cost saving by gaining longer-term reliability of your supply chain is more critical for your success.

Ravi Patel

 

Published in: on August 30, 2010 at 5:40 am  Leave a Comment  
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The 2% Solution

A Controller at a client’s company has coined a cost savings initiative – The 2% Solution – that is worthy of consideration by Entrepreneurs.

The concept is fairly simple. Any significant expense line item in a company can be dissected, analyzed and streamlined to save at least 2%, if not more. According to this Controller, saving 2% is a “slam-dunk” and can be implemented by any company.

Entrepreneurs might want to consider “The 2% Solution” for their companies.

Ravi Patel

www.patelCFOservices.com

Reducing Medical Benefit Costs

Entrepreneurs should always be looking at cost-effective ways of providing medical benefits to employees.

A simple way is to increase the office co-pay amounts on your medical plan and create a self-insured “reimbursement pool” for employees. The savings on monthly premiums might more than offset the reimbursement amounts.

Talk to your insurance broker. Do the Right Things!

Ravi Patel

www.patelCFOservices.com

Expense Avoidance

During tough economic times, Entrepreneurs often focus on expense reduction programs. While this is necessary, have you thought about expense avoidance?

Expense reduction programs focus on reducing a certain percent of the total amount. How about starting with the question whether the expense is necessary at all?

Expense avoidance reviews start with a “zero-base” and systematically determine if expenses are necessary in the first place.

Complementing expense avoidance analyses with reduction programs might yield optimal results for Entrepreneurs.

Ravi Patel

www.patelCFOservices.com

Are you Managing your Open Workers Comp Cases?

Workers Comp insurance is quite a significant cost of doing business. Premiums keep on increasing, but you can do something about managing such costs.

Entrepreneurs should review all open workers comp cases and manage their favorable closure. Meeting with your broker and insurance carrier periodically and examining the status of each open case and developing a plan to get the employee back to work should be of prime importance. Mitigating or reducing the reserves established by the insurance carrier for open cases should be actively negotiated.

Open Workers Comp cases should be managed proactively. However, the best course of action is to establish an effective safety program and ensuring compliance with policies and procedures.

Ravi Patel

www.patelCFOservices.com

Applying the 80/20 Rule to Cutting Costs

Cost reduction and containment are of prime importance in this economy. Even without the downturn in the economy, rationalizing and optimizing your costs and expenses should be an ongoing focus of Entrepreneurs.

How do you go about cutting costs? Do you randomly select areas to focus on and start reviewing items to cut?

I suggest that you might want to apply the 80/20 rule to cost reduction. Focus on 20 percent of your cost categories that account for 80 percent of your dollars spent. Start with the most significant dollar-weighted category and move down the list.

This should allow you to get the optimum results. Starting and spending too much time on low-dollar cost areas will not provide you enough returns on time spent.

With apologies for revising  an old saying, I suggest “Be Pound Wise and Penny Foolish.”

For more info, please contact Patel CFO Services at www.patelcfoservices.com

Ravi Patel

www.patelCFOservices.com

In Lieu of Layoffs

With the downturn in the economy, Entrepreneurs are facing tough choices while reducing costs and expenses. Many are contemplating layoffs for some of their employees.

There are creative ways to reduce labor costs without having to layoff key, experienced people. Entrepreneurs should consider other options in lieu of layoffs.

For more info, please contact us at www.patelCFOservices.com

Ravi Patel

www.patelCFOservices.com

Financial Response Strategies

Entrepreneurs should be attempting, in the current economic environment, to develop response strategies on how to deal with the impact of the severe financial downturn on their businesses . Some of the issues faced by Entrepreneurs include cash conservation, employee layoffs and morale, reduction of overhead and fixed expenses, re-alignment of variable expenses to revenues, customer and product/service rationalization, restructuring of debt and so on.

Entrepreneurs should create a menu of contingency plans to deal with different kinds of financial situations and implement, as needed, cost-effective strategies to deal with the economic downturn.

Creative solutions are what will enable Entrepreneurs to successfully address this business cycle.

Ravi Patel

www.patelCFOservices.com