The quickest way to improve profits and cash flows is to cut unnecessary costs.
It’s a simple idea, and easy to get started by following these steps.
- Analyze year-over-year changes to operating expenses
- Review monthly cost trends
- Scan your general ledger transactions report
- Start cutting costs…right now!
Cost cutting step #1: Analyze year-over-year changes to operating expenses
Run an income statement for the current year compared to the same period in the prior year.
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.
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%?)
Highlight any increases that are large or unusual. This is your hit list of potential costs to cut.
Cost cutting step #2: Review monthly cost trends
Run a monthly income statement for the last 12-months.
Scan through the expense accounts and note any large, one-time expenses.
What are the expenses? Do you need them? If you’re not 100% sure they’re needed, add them to your hit list of potential costs to cut.
Cost cutting step #3: Scan your general ledger transactions report
The general ledger report is a listing of all business transactions (money you spent, money you received).
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.
When cost cutting, the devil is in the details. The general ledger report has all the details you’ll need.
Do this next:
- Watch the short explainer video below
- Join our peer-to-peer network of brewery owners and managers (we talk cost cutting all the time)