FD Insight: Cost Control

Cost reduction is an uncomfortable subject in business. Raising the topic will make people shift anxiously in their seats.

It brings with it images of desperation, and the ugly task of selling off assets, closing departments and making redundancies. But cost control is an important part of staying competitive, and reduction doesn’t mean you can’t do and have all the things which you already have and do at present.

Sound like a trick? It isn’t, it’s about spending smarter and bargaining for better deals. We asked the question at a recent FD Recruit – FD & CFO Conference to find out how the UK’s most successful finance directors keep their costs in check.

Join an association
There is a whole range of clubs and associations which businesses can join, from general organisations like the local chamber of commerce and the Federation of Small Businesses, through to more industry-specific groups.

One of the best aspects of these organisations is the discounts which they have access to on a whole array of products and services. Simply being a member will open up the opportunity to save big on insurance, energy, legal fees and plenty more besides. Often the savings on just one of these offers will cover the membership fee alone.

And not only are these products heavily discounted, but they are endorsed by major organisations, meaning you aren’t compromising on quality.

Form an alliance
The reason these organisations are able to offer such discounts is due to their size, and the economies of scale they have access to. Bigger businesses benefit from this luxury, too.

But few smaller businesses realise that they can create their own economies of scale by teaming up with other firms around them. This could be other businesses in your building, fellow members of your local networking group, a group of your customers and suppliers, or even, if you’re on friendly enough terms, other businesses in a similar line of work.

By working together, businesses can make purchases together. If you’re all buying the same or similar things anyway, then consider pooling your resources, making the purchase together, and getting a discount owing to the size of the order.

Shop around
There’s a raft of reasons why businesses pay over the odds. From considering shopping around to be a waste of time, to feeling uncomfortable about asking for discounts. But there is a huge reason to head out to try to find the best price: money saved. And because money is central to the survival of a business, if not the main reason to be in business, that should surely trump all.

One top tip offered by many finance professionals is to ask for quotes from three sources before making a purchase. This should be enough to give you some choice about what to spend, and if the supplier knows you’re shopping around, they’ll recognise you as a savvy buyer and give you the best price they can to earn your custom.

And if you feel uncomfortable asking for discounts, consider that many firms set their prices with the expectation that they will give discounts somewhere along the line. These can be straightforward, such as Direct Debit discounts, or at least a discount for not paying by credit card. There may be paying early discounts, or seasonal discounts. There may even be a discount just because you asked if there was one.

Work differently
Offices full of desks seating 9-to-5 employees worked well for a long time, but increasingly businesses are finding that holding everybody under one roof at the same time is not only unnecessary, but also costly.

For starters, if your business has a need for a specialism, but only sporadically, then rather than hiring somebody and paying too much, or giving the job to somebody under qualified and getting poor results, consider hiring a contractor or freelancer. That way, you only pay when you need their expertise, but you get quality work. Freelancers are readily available in most disciplines.

Also consider flexible working. It’s great to be able to hover over an employee’s desk and check up on them, but time and again studies have shown that this does nothing to improve productivity. In fact, many employees value trust and independence in the workplace and often work better when given responsibility for a task.

And with so much low cost, freely available software and technology that allows for remote working, this could be a device which not only saves travel expenses and affords you the opportunity to buy, equip and run a smaller office, but it improves production by allowing employees to work in their own environment on their own schedule.

Recruit smarter
One of the biggest expenses a business can make is recruiting a new member of staff. Which is why many will try to cut corners, do it themselves or generally eek out a saving somewhere.

But consider this: a bad recruit will need replacing soon enough. So even if you saved money, you may have to pay it out two or three times again before landing your ideal candidate. Recruiting smarter, by working with a professional, you can get the right hire, first time. They will be the best at their job, and you won’t have to repeat the whole process in a few months’ time.