Save the Bone

This economic crisis is a great wake up call to really look at your numbers. Not sure exactly where to look to improve your bottom line? Read on and delve into your budget. Why? A better understanding of your numbers equals making better business decisions.

Accounting systems analyst and developer Norma Ferrara and I have worked together for two decades through all kinds of ups and downs. We recently ran a tele-seminar for Center City Proprietors Association that was likened to a SWAT team, giving an overview of the places you should look to cut costs and save money, where NOT to cut, and where you should actually spend right now.

How can you make the most of what you have?

Norma calls this “Save the bone, I’ll make soup” theory. Whenever her mother, a Great Depression survivor, went to a restaurant, she would always take home the bones and leftovers to make soup, and then feed the whole extended family the next day. The kids were sometimes embarrassed, but they and everyone else loved the delicious, comforting soup that came from those bones.

So it might feel uncomfortable reviewing your numbers now, and it’s okay to feel uncomfortable, just take a lot of deep breaths and do it anyway, cause you will be better off afterwards.

Re. recordkeeping:
• Invest in Quickbooks or other small business software if you aren’t already using it
• Review your income and expense reports more frequently
• Start using timelogs to track and analyze projects
• Hire a professional organizer to keep your office clutter-free and your files up to date and at hand

Re. staff and salaries:
• Reduce salaries on a sliding scale basis, or lower hours
• Temporarily suspend select benefits or perks like 401K’s, cell phones, extra insurances like dental/vision
• Reduce health insurance costs by raising co-pays and other insurances by raising deductible amounts
• Compare prices for outsourcing some part-time or short term services
• If you are outsourcing already, ask about lowering fees, services
• Keep training staff, but make sure it is task specific
• Trade days off for overtime, and carefully monitor overtime
• Give the option of unpaid vacation days like December 24 or days before other holidays which are never high efficiency days

Re. office expenses:
• Eliminate postage, long distance rates, faxes
• Use email, Skype, Total Call, Opex business, Pioneer Telephone
• Scan documents and send via PDF instead of hard copy
• Shift customer service to email and cut the 800 number if possible
• Look twice before you buy automatic software upgrades
• Do invest in keeping your network secure and upgrading your operating system
• Renegotiate your lease, reduce space or sublet unused space
• Buy refinished office furniture and equipment rather than new

Re. dues/subscriptions:
• Keep memberships that give you access to health benefits, information, meeting potential clients, cost-savings and discounts
• Read magazines and newspapers online
• Ask for trial memberships and subscriptions and examine the value more closely

Re. inventory:
• Review what is and isn’t selling more frequently
• Get rid of slow-moving goods faster: sell at cost, barter for other things you need, sell on ebay or to a liquidator
• Buy less and more selective inventory
• Negotiate more flexible terms with suppliers
• Invest in an ecommerce site, with suppliers drop-shipping goods
• Look where you can maybe lower prices and pass on some savings to your customers

Re. banks and credit cards:
• Comparison shop credit card merchant fees – the lowest now are Flagship Merchant, Merchant Warehouse – check with your business association for merchant fee discounts through membership (these change constantly, so depending on when you are reading this, re-check)
• Comparison shop credit cards – lowest interest right now are Capital One, Citi Platinum, Bank of America (these change frequently too, to re-check)
• Transfer credit card balances to 0% for 12 months, like Discover, Captial One and Citibank
• Stop getting cancelled checks with your monthly statement if there is a fee
• Switch banks if you are not getting free checking
• Locate your own bank’s ATM machine so you don’t pay out of network fees

Re. working capital:
• Monitor accounts receivable schedules often, don’t deliver until balances are paid, invoice asap or institute COD
• Offer discounts for early payment
• Use low interest credit card advances as needed: Capital One is the lowest now (re-check as this is in flux)
• Check out bank credit lines
• Contact the local SBA; as a part of the economic recovery package, more loans are being offered
• As a last resort, consider merchant cash advance providers that work with a fixed percentage of sales (no balloon repayments, specific credit card processors or application fees) and check with your CPA if they feel this is viable for you

LOOK FOR THE OPPORTUNITY.

You think the economic crisis we are in now is the first in history?

To quote Giorgio Armani, one of the wealthiest and most successful fashion designers in the world, who just, to the incredulity of many, opened a 43,000 sqaure foot mega-store in Manhattan, “an entrepreneur shows his true colors in a period of crisis, not in a period when everybody is having a success.”

Many a great company got their start in the midst of crisis years including: IBM (during the Long Depression of 1873-1896), General Electric (during the Panic of 1873), Proctor and Gamble (during the Panic of 1837), United Technologies Corporation (during the Great Depression of 1929) and Federal Express (during the Oil Crisis of 1973).

So, what bones can you save? What soup can you make?