We have all approached that time of year where we are reviewing 2014 expenses and planning for 2015. Budgeting can cause a lot of anxiety in us since we are ultimately guessing what will happen in the next 12 months. Did everything happen in 2014 exactly how you expected it to? I highly doubt that you were able to predict every expense that you had to pay and every dollar that you received and if you did, you could develop another business to set up budgets for every other company.
Now that you realize that you are not alone in this struggle, let’s take a look at a few expenses that add up quickly if you are not keeping a close eye on them.
1. Wining and Dining – It is always nice to take a client or a potential client out golfing and then to dinner. In your mind, you know that the return on the investment can be lucrative so you do not want to spare any expense. Depending on your business, this can be a great way to solidify future income but only if you are paying attention to the cost. It is easy to get wrapped up and order that second $100.00 bottle of wine but when all the receipts are analyzed, did you realize how much you spent or is there sticker shock when your credit card statements come in from a month’s worth of entertaining? For most executives, wining and dining should be a well thought out process and should be used for as needed situations, not to have a night out on the business dime.
2. Labor Productivity – Paying your employees may be one of your largest expenses. We all would like to think that our employees work at top performance all 8 hours of their work day but that is oftentimes not the case and many companies hire additional employees to cover what is falling through the cracks. There are many reasons why an employee’s performance may be decreasing and your role as the owner is to identify the cause and take action. Would employee satisfaction increase if their pay was raised versus hiring for an additional position? Would the cost of replacing the employee outweigh the expense lost by procrastination?
3. Vendors & Miscellaneous Expenses – When was the last time you reviewed and shopped around for new vendors? We often use the same person for the same thing year after year because it is easier than checking elsewhere. Pricing changes all the time. New vendors come up with more efficient ways of accomplishing the same goal for a lesser amount. This is an area where you can think outside the box and save a lot of money. Is the store on the way to the office for you and you can save the delivery charge just by taking a 5 minute detour and picking it up yourself? Do you have an employee that loves to bake and would enjoy a few extra dollars or an hour of PTO for bringing in muffins on Friday instead of the store bought pastry display? Make a list of your vendors and have your receptionist research alternative methods in her down time. Get staff input and suggestions; they are in the trenches and may know of another option that you wouldn’t have thought of.
As we begin preparing for a new year, spend time analyzing where your money is going and try a few new things in 2015 that can save your company money, it’s definitely worth a try. Best of luck in the New Year!