Business Costs - Are They Adding Value?
In times like these, business owners take a very critical approach to all costs their business incurs. Whilst reviewing costs should be a constant process for any business, it’s important to remember that there is a finite amount by which you can minimise costs without harming your ability to provide a quality service or product and produce a sustainable profit.
Look at the outgoings in your business and question the value you are receiving from the outlay and can you identify the return on this investment in the medium to long term? Is this cost part of laying the foundations for future growth and profitability and efficiency of the business or, is it simply a commodity that can be shopped around for?
A word of warning – suppliers are not equal in terms of value they offer your business – it’s important to nurture relationships with key suppliers that are adding (and will continue to add) value to your business.
When looking at the costs and outgoings of your business it’s important to have the necessary, accurate, timely, information on which to base your analysis. Any basic accounting system should produce standard reports to assist you in your analysis, these would include:
- Profit & Loss (showing each cost as a percentage of your income).
- Profit & Loss Comparison Reports (Comparing your Profit & Loss with the last year and showing a variance from one period to the next, this will show where your costs have actually increased over the period).
- Balance Sheet Comparison Report (showing the movement in your Balance Sheet accounts for the Profit & Loss Period).
- Statement of Cash Flows Report (shows where the money has gone).
- Budget vs Actual Report (Comparing your budget with your actual figures puts things in perspective, and quickly identifies unexpected cost overruns or a decrease in expected sales income).
- Debtors Aged Summary Report, effective Debtor management is vital for any business.
- Profit & Loss Budget and Cashflow Forecast for this year – It’s useful to know where you’ve been, it’s more important to know where you are going – so setting a Profit & Loss Budget is vital – what you set is what you get. Be sure to also budget for what you take out of the business in wages, drawings, loans to fund “lifestyle assets”, and now may be the time to determine what that expensive (rarely used) toy is costing you.
What we hear now – more than ever, when paying the bills – is the question of “value”. We are asking ourselves, am I receiving value from this cost? On the flip side we should also ask ourselves when we issue an invoice, am I delivering (and communicating) value and am I confident that this value is perceived by our customer, client or patient, as the case may be?
Business Costs - Are They Adding Value?
Moments of Truth
Is your Accountant Necessary?
Where Has Our “Disposable Time” Gone?
Using the Internet to Buy Locally
Is your head in the Cloud?
Do Apps – Add Up?
Future Shock – It’s Here Again
The Cloud - What’s Old is New Again
How Disruptive is your Business?
Clayton Oates, QA Business
Peter Fowler Collins Hume
Collins Hume has over 12 years experience in finance and is a specialist in driving business forward while working smarter not harder. Awarded CPA Australia’s Top 40 Young Business Leaders 2012 he helps make things happen.
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Clayton Oates QA Business
Clayton Oates, QA Business, our Channel 7 business efficiency guru cuts through the red tape and helps you streamline your business to make things happen.
Here are Clayton Oates's Expert articles:
- Business Costs - Are They Adding Value?Aug 12, 2010
- Moments of TruthNov 16, 2010
- Is your Accountant Necessary?May 09, 2011
- Where Has Our “Disposable Time” Gone?Jun 07, 2011
- Using the Internet to Buy LocallyAug 30, 2011
- Is your head in the Cloud?Nov 30, 2011
- Do Apps – Add Up?Mar 13, 2012
- Future Shock – It’s Here AgainJun 14, 2012
- The Cloud - What’s Old is New AgainSep 03, 2012
- How Disruptive is your Business?Nov 30, 2012
- Clouds Have Different ShapesMar 22, 2013
Meg Nichols EnviTE Inc
General Manager EnviTE Inc, providing advice on the Northern Rivers employment market, recruitment, industry trends and best practice.
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Moyra Burke-Smith AM Marketing
Moyra Burke-Smith, AM Marketing – with over 20 years of marketing experience for both small and large companies in Europe and Australia she is our expert at making your marketing work for your business. In her spare time she makes a mean mojito.
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Scott Hales Barefoot Telecom
Barefoot Telecom has been in the telecommunications industry for 14 years, working in many different roles for a number of providers. He is passionate about providing exceptional customer service and building long standing relationships with his clientele.
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The Small Print:
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