The quickest way to improve profits and cash flows is to cut unnecessary costs.<\/p>\n
It’s a simple idea, and easy to get started by following these steps.<\/p>\n
Cost cutting step #1: Analyze year-over-year changes to operating expenses<\/strong><\/p>\n Run an income statement for the current year compared to the same period in the prior year.<\/p>\n Add a column to calculate the year-over-year change in each account, and another column to show the change as a percentage increase or decrease.<\/p>\n Scan through the changes in each expense account. Look at the dollar changes (what increased?) and look at the percentage changes (what increased by more than, say, 10%?)<\/p>\n Highlight any increases that are large or unusual. This is your hit list of potential costs to cut.<\/strong><\/p>\n Cost cutting step #2: Review monthly cost trends<\/strong><\/p>\n Run a monthly income statement for the last 12-months.<\/p>\n Scan through the expense accounts and note any large, one-time expenses.<\/p>\n What are the expenses? Do you need them?\u00a0 If you’re not 100% sure they’re needed, add them to your hit list of potential costs to cut.<\/p>\n Cost cutting step #3: Scan your general ledger transactions report<\/strong><\/p>\n The general ledger report is a listing of all business transactions (money you spent, money you received).<\/p>\n Use this report to get more detail about your hit list of potential costs to cut. This is the list you made in step #1 and #2.<\/p>\n When cost cutting, the devil is in the details. The general ledger report has all the details you’ll need.<\/p>\n Do this next:<\/strong><\/p>\n\n