Cost reduction methods. Ways to optimize and reduce costs in an enterprise

Every business spends money on producing goods or providing services. Profit is considered to be the difference between the amounts spent on production and gross income, which is also called turnover. In some cases, you can increase cash flow by understanding which expense items can be reduced, but this must be done very carefully so as not to harm the company’s reputation or reduce the quality of the goods produced.

What does the company spend money on?

Any enterprise has its own specific expense items that help it function fully. All of them can be intelligently optimized, which will certainly bring increased profits and reduced costs. You have to invest money in the following needs:

wages;
purchase of raw materials;
transportation of materials and finished products;
taxation;
advertising;
maintaining large clients;
rental or maintenance of premises;
utility bills;
maintenance and repair of production machines and units;
other expenses.

Before reducing the costs of an enterprise, it is worth carefully reviewing each of their items and drawing a conclusion about appropriate optimization.

Remuneration

At any enterprise there are hired employees who, for a certain remuneration, perform a designated amount of work. Russian legislation states that the employer can independently regulate the level of wages, lower it or increase it.

However, keep in mind that there is a maximum allowable rate for reducing wages, and an employee cannot receive less.

To optimize the salary expense item, you can take the following measures:

reduce staff;
use outsourcing services;
transfer workers to part-time;
use part-time labor;
reduce the management staff;
automate production to partially or completely eliminate manual labor.

All these points will be effective only if their application does not negatively affect the final goal of each production - profit. For example, if you fire a highly paid woodworking specialist and hire a less qualified but cheaper employee in his place, you may face a decrease in the quality of your products, and this entails the loss of potential customers. It is for this reason that any manipulation with wages must be thought out to the smallest detail.

Purchase of raw materials

What we make the product from is also quite expensive, especially considering the recent devaluation of the ruble and the massive use of imported materials. However, this expense item can also be reduced by the following actions:

searching for more profitable partnerships with suppliers;
assistance with raw material producers;
wholesale purchases together with other companies to receive volume discounts;
implementation of design changes in production to switch to other materials;
independent production of some components, spare parts, etc.;
transition to cheaper analogues;
replacement of imported raw materials with domestic ones.

These actions must be implemented very competently and wisely so as not to reduce the quality of the final product. For example, to make chocolates, it would be more expedient to purchase high-quality cocoa beans, but switch to more affordable packaging, so you can maintain the same composition of the product, but its cost will be lower than before.

Transportation of materials and finished products

Production costs for transport are sometimes fabulous, because raw materials need to be transported from different countries or even continents, and finished goods need to be delivered throughout the country. In this case, it will be beneficial to use the services of logisticians or create such a department at your enterprise. This will maximize the productivity of transport, since it will travel with cargo in both directions, respectively, to pay for the driver’s labor and fuel. You may also want to consider partnering with material suppliers that are located closer to your company.

Advertising

To sell a product at a favorable price, you need to present it competently to the end buyer. This is precisely why they are arranged advertising campaigns, the costs of which are often very high. To reduce this cost item, you need to reconsider the following factors:

the budget may be too high and can be reduced without compromising the final result;
searching for new employees, sometimes well-known advertising agencies offer their services at inflated prices, in which case it makes sense to start collaborating with younger and more financially accessible companies;
assessment of advertising profits: it is worth finding out whether advertising is effective, whether it brings more profit than the entire advertising budget, if the indicators are positive, then the companies are fulfilling their functions, if not, then you need to look for the reason for the failure;
settlement with advertisers by barter, this method cost reduction will be effective if you have something to interest advertising agency, it can be either a product or a service.

If, when reducing PR costs, you do not get these results, then the savings will be ineffective. It is for this reason that each cost reduction item must be carefully reviewed and analyzed.

Maintaining large clients

Each production makes certain concessions to its large clients and makes special offers for them, introduces loyalty programs, and provides additional services. All this entails considerable costs, which reduce the level of profit. You can refuse the most expensive services, for example, SMS notifications to clients about promotions, constant mailing of letters to email and other things. At this point, you also need to weigh the pros and cons of saving, because refusing some services can negatively affect the company’s image and reduce the number of its regular customers.

Rental and maintenance of premises

Any production has a certain area, which is necessary for the comfortable organization of all work processes. It can be a small hangar, or a huge territory of several hundred hectares with premises and workshops for various purposes. Regardless of the size of the premises, you need to pay rent for them or spend money on their maintenance. You can reduce this cost item using the following tips:

revision of the terms of the current lease agreement in favor of the tenant;
moving to another premises that will be more economically profitable;
the possibility of subletting some space;
repurchase of leased premises, if appropriate.

If you are the owner of all premises and production buildings, you can reconsider your expenses for maintaining them in a safe condition for work. Regular current and major repairs can be done using cheaper materials; premises can be cleaned without cleaning companies, but with the help of hired employees.

Utility payments

Enterprises use for their activities natural resources, payment for which is now quite expensive, given the special tariffs for production. The following measures can help reduce this cost item:

establishing stricter control over energy savings;
introduction of energy-saving production processes;
transition to bill payment for services.

Equipment maintenance and repair

To ensure that production does not stand idle, you must always keep the equipment in good condition. High-tech machines are most often serviced by special companies, whose services are not cheap. You can reduce waste here too if you reconsider the following factors:

deferment for a long or short period of current repairs of units;
refusal of the services of contractors and repair of machines with the help of their employees;
revision of the terms of the contract with contractors in favor of the company;
search for more affordable companies providing service services.

All these points can significantly reduce the cost of machine repair and maintenance.

However, remember that in some cases it will be more profitable to trust a team of professionals than to create your own service department, since labor good specialists is expensive, especially when it comes to software for units.

Other expenses

This is a very broad article, which will have its own specific points for each enterprise. For example, you can take a large plant that spends money on the following additional measures:

scientific and design activities;
maintaining large assortment goods;
market research;
work on selecting only certain raw materials with certain characteristics;
constant improvement of the qualification level of employees, etc.

In some cases, without these additional expenses You can completely dispense with them if they do not particularly affect the level of product sales. However, when the reputation of the company and the number of its regular customers depend on these factors, it is worth carefully considering cutting costs, because this can lead to a difficult economic situation.

Competent cost optimization: the bottom line Any enterprise can reduce its costs without compromising its reputation, the quality of the final product or working conditions for employees. However, in order to correctly evaluate all reserves, it is necessary to conduct a serious study that will show which cost items would be advisable to cut and which should be left at the same level for the full development of production. Only a carefully thought-out cost-saving plan can produce the desired results.

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Many companies pay attention to the issue of cost reduction. The possibility of reducing costs is considered by economists both when planning performance indicators for the next year and at the level of top managers. However, the costs are a necessary condition activities of any organization. Each company solves the issue of reducing them differently. Some managers make fundamental decisions to get rid of non-core assets and divide the business, while others reduce expenses on budget items. Let's consider the positive and negative traits these cost reduction methods.

Cost reduction models

Let's consider cost reduction models depending on the intensity of the measures taken. The advantages and disadvantages of each of these models are given in the table.

Advantages and disadvantages of cost reduction models

Cost efficiency model	Advantages	Flaws	Example
“Pure” cost reduction	Real cost reduction by eliminating unproductive costs Increase	A serious analysis of company costs is required Risk of staff dissatisfaction Risk of reduction due to the elimination of truly necessary costs Risk of losing business	Disposal of a non-core asset
Cost intensification		Tax amount (20%), rub.
Branch for tailoring
Shoe repair branch
Branch - food plant
Branch - printing house
Total	1 030 000	1 003 000

Promising areas for cost reduction are the largest in absolute values and at the same time manageable items. It is necessary to analyze how reducing costs will affect the overall results of the company. Thus, a significant reduction in personnel costs without changing work technology will cause dissatisfaction among employees and can alienate the most effective personnel. And without qualified personnel, the company simply cannot operate.

However, in practice, costs can be reduced by 5–10% for each cost item. In this case, a monthly inventory of costs should be carried out.

Let's consider ways to minimize costs in the form of a table.

Ways to minimize costs

Cost	Ways to reduce
Raw materials	1. Selecting suppliers who include delivery costs in the cost of raw materials. 2. Selecting suppliers who provide free warranty repairs. 3. Purchasing raw materials and materials directly from the manufacturer or reducing the number of intermediaries. 4. Carrying out assembly on your own. 5. Acquisition large batches in the presence of storage premises and small batches of raw materials and materials in the absence of premises. 6. Drawing up preliminary estimates for a clear calculation of the required raw materials
Electricity	Transition to economical energy consumption (energy-saving lamps, introduction of day and night energy consumption sensors)
	1. Control of wages for downtime. 2. Reducing cases of payment of financial assistance and bonuses at the expense of net profit. 3. Combination of positions. 4. Reduced supply costs normal conditions labor. 5. Reducing payroll taxes through outsourcing and the use of individual entrepreneurs
Equipment operation	1. Use of leaseback. 2. Carrying out timely maintenance. 3. Minimizing technological downtime. 4. Reducing costs during breaks and rest. 5. Renting or selling unused equipment
Sales costs	1. Reducing transportation costs by choosing a logistics company and establishing optimal tariff rates. 2. Automation of accounting for products sold. 3. Organize storage in such a way as to reduce transportation costs from the manufacturer to the delivery warehouse
General production	1. Reduced costs for intermediate storage. 2. Selling products with expiring shelf life at reduced prices
Administrative	1. Reducing Internet and telephony costs by controlling costs and closing Internet traffic. 2. Reduced entertainment expenses. 3. Optimization of advertising costs within the limits established by law

In addition to the above, it is possible to adopt the following ways to minimize costs:

1. Reducing tax costs:

Conclusion of agreements with individual entrepreneurs;
concluding agreements with legal entities;
organization of a holding structure with a simplified taxation system;
transfer of management functions to a separate legal entity.

2. Reducing the cost of maintaining unused property:

Sales of materials obtained during dismantling,
sale rather than write-off of depreciated fixed assets.

3. Innovative cost reduction:

Introduction of more cost-effective technologies and equipment;
development of low-cost production.

4. Reducing costs associated with:

Transfer of property for repeated use of bonus depreciation. An organization has the right to write off up to 10% of the original cost of a fixed asset (depreciation bonus) at a time as expenses of the current reporting (tax) period (paragraph 2, clause 9);
reducing the useful life of an object by the time it was used by the previous owner for the purpose of calculating depreciation (clause 7 of Article 258 of the Tax Code of the Russian Federation, letter of the Ministry of Finance of Russia No. 03-03-04/1/142);
proof of the repair nature of the work instead of modernization and reconstruction;
recognition as an expense of the redemption value of the property if the object is accounted for by the lessor. It does not contain conditions according to which redemption payments cannot be attributed to expenses (Resolution of the Federal Antimonopoly Service of the Ural District No. F09-2240/08-S3).

5. Dealing with debt:

Carrying out debt collection measures in any case.

Reduced investment and procurement costs

Particular attention must be paid to the issue of reducing investment costs. Investment costs are the costs that arise during the implementation of activities associated with the expansion of an existing business or the creation of a new business.

Many enterprises apply the principle of a two-stage selection of investment projects. At the first stage, the unit initiating the project prepares a preliminary application justifying its feasibility. At the second stage, after screening out less competitive ideas, a feasibility study of the project is calculated (with the involvement of independent experts - internal or external consultants with experience in examination and similar calculations). After this, projects that have the best economic indicators (payback period, internal rate of return, etc.) are selected.

The subsequent level of operating costs directly depends on the results of the implementation of investment projects. It follows from this that next feature(aka complexity) in managing investment costs: it is necessary to consider the level of not only investment, but also operating costs, which will be a consequence of the investments made. For example, if, due to lack of money, the work schedule is shifted and the implementation of the project is delayed, then the costs of maintaining project participants increase.

Thus, when implementing an investment project it is necessary:

1. get rid of non-core costs;
2. meet the project deadlines;
3. meet the established budget for investment costs.

Purchasing activities are the main cost area of an enterprise.

Optimization of the procurement service can be carried out in the following areas:

Centralization of procurement. In many companies, departments independently make purchasing decisions and sign supply contracts. This creates a “colander effect”: buyers manage only part of the purchasing budget, and the enterprise’s financial resources flow out of many “holes” (cost centers). Centralization of the purchasing budget, involvement of professional buyers in the search for a supplier, the process of negotiating prices and signing a contract can significantly improve control over the formation of costs;
- information support for procurement. The formation of a database of suppliers and contracts, a nomenclature directory makes it possible to simplify the daily work of buyers, increase the transparency of the purchasing process for the manager, eliminate duplication of supplies and, if necessary, consolidate the same type of nomenclature from one large supplier. It makes sense to regularly monitor raw materials markets. You can recommend participation in specialized conferences and exhibitions, exchange of information with other industry participants, etc.;
- work with personnel. It is no secret that in a “roll-and-saw” economy, the purchasing department is most unstable to the temptation to slightly increase the level of purchasing prices for personal compensation on the part of the counterparty. The manager should regularly rotate personnel in the purchasing department so that people do not sit too long and do not strive, as they say in the business environment, to “build a personal sawmill.”

Some areas of work to reduce purchase prices can be indicated:

Introduction of personal responsibility of purchasers for the total cost of procurement costs and for the timely fulfillment of the terms of contracts with counterparties. This is one of the prerequisites for increasing procurement control;
- maximum detail of the procurement budget by item, quantity, contractors. It has already been said above about the fundamental importance of the system for an enterprise when implementing a cost reduction program. However, the head of the purchasing department should not be satisfied with the total amount of the procurement budget, which he distributes at his own discretion. It is necessary to clearly understand from whom, at what prices and in what volumes raw materials will be purchased. Therefore, the purchasing department should become the center for collecting such information; it should come primarily from the production department;

Conducting tenders for supplies (this is especially important in the case of large supplies or complex items). It is worth remembering that much depends on vocational training tender: correct preparation of documentation and list of participants, transparent selection procedure.

Reducing costs for non-core assets

The spin-off of non-core assets is not so much aimed at reducing costs, but rather allows the company to focus on its core activities and ensure the receipt of high-quality competitive services.

Typically, non-core assets include service and support units, such as industrial construction, transport, security and safety.

Sometimes a decision is made to separate certain production structures (for example, for the production of components, components and assemblies). This marks the beginning of the company changing its business strategy - acquiring a narrower specialization.

Let's consider possible transformations affecting auxiliary production (non-core assets).

IN in this case The set of alternatives itself may deserve special attention, the effect of each of which is determined using a standard key approach.

In addition, it is possible to use non-core assets for the purpose of:

Changes to the work system;
creating an optimal management structure.

These activities will allow:

Consider the needs of the company and the population;
implement the principle of results-oriented budgeting;
improve management efficiency;
concentrate material, technical, financial, labor, and information resources;
strengthen and modernize the material and technical base and.

includes a whole series activities that can be divided by time frame:

1. Maintaining financial discipline. Developing measures to maintain financial discipline involves developing a financial plan and strictly following the approved data. Decisions made by the manager and recorded in the budget can only be violated in exceptional cases. The head of the enterprise is the main agent in the cost reduction process.
2. Organization of accounting. In order to carry out a systematic struggle to reduce costs, an enterprise needs to implement a financial accounting and control system in one form or another. In this case, it is necessary to take into account not only expenses, but also income. Prompt measures must be taken to collect the debt. In addition, the enterprise itself must promptly make payments to the budget, personnel, and contractors, which will avoid penalties.
3. Development and implementation of a cost reduction plan. The goals of a cost reduction program are the target values of cost items that need to be reduced, presented in as much detail as possible. These activities involve developing a plan both for the entire enterprise, identifying weak points where costs can be reduced, and for each structural unit separately, which will strengthen local financial discipline.
Systematic cost reduction in general should be associated with improved management in three areas: investments, procurement, production processes (improvements due to organizational and technological changes).
4. Carrying out inspections. To assess the effectiveness of cost reduction, it is necessary to constantly conduct independent monitoring, with the help of which it is possible to track natural loss, technological losses, possible shortages and adjust the cost reduction plan in practice.
5. Loss analysis. Any result, even negative, must be carefully rechecked in order to reduce costs in the future. The losses of overproduction, which forces the sale of goods (services) at reduced prices, must be analyzed. Besides, special attention should be given to defects, rejects and rework. This not only reduces the cost of goods, but also entails additional costs. Waiting for products and interruptions in the production cycle can also lead to increased costs. Waiting means downtime, and downtime for a company means lost profits. Downtime occurs for various reasons: lack of commitment from external and internal suppliers, lengthy equipment readjustments, renovation work, poor planning of production capacity utilization, etc. Also leading to costs is the unused potential of employees, who must be employed 40 hours a week in accordance with labor legislation (otherwise the company loses in labor productivity). |

Distribution and production costs are a qualitative indicator of the enterprise’s activities. The level of costs is directly related to the final result: the higher the costs, the more invested in the creation of the product - a good or service, the greater the nominal value it has on the market. However, the optimal cost-benefit ratio is a matter of skillful management. It is necessary to reduce costs wisely, since each invested ruble should bring tens and hundreds of rubles in profit. Each company solves the issue of reducing them differently. Some managers make fundamental decisions to get rid of non-core assets and divide the business, while others reduce expenses on budget items.

First, it is necessary to analyze the cost structure and select those cost items that make the greatest contribution to costs. Secondly, we need to determine which cost items can, in principle, be reduced, and to what extent we can manage these costs. Let’s say the cost item “raw materials” makes up 50% of the total cost structure, but if it is impossible to find suppliers with lower prices, then it is extremely difficult to significantly reduce this item for a given volume of output and without changing production technology. It should be noted that personnel costs that can be reduced, in addition to payroll, also include:

- expenses for social package and benefits for employees;
- expenses for industrial training and retraining of employees;
- costs of selecting candidates and hiring;
- costs of ensuring safety precautions;
- cost of maintaining workplaces, including the cost of work clothes, heating, cleaning, etc.;
- other types of personnel costs.

The main principles that will help to achieve cost reduction in enterprises are: planning, financial discipline and control.

The first principle of cost reduction in an enterprise is planning. Every enterprise must have a clear and specific financial plan, accounting for all possible income and expenses of the enterprise. In this case, the manager must have a financial plan, both short-term, monthly, weekly, and long-term, investment, for a year, five years or more. Some decisions may be costly in the short term but very beneficial in the future.

Another option for conducting the financial and economic activities of an enterprise is a preliminary detailed consideration of the proposed solutions, rather than an analysis of the costs already incurred. The degree of effectiveness of each decision must be selected: from drawing up a feasibility study and determining project performance indicators to choosing the use of a particular financial and economic model of the enterprise. The main goal of such planning should be to eliminate ineffective solutions that require significant financial costs.

Compliance with financial discipline is the second equally important principle of cost reduction. Those decisions that were made collectively regarding financial expenses, may be violated only in cases of extreme necessity.

Accounting and control are important functions of any manager in all matters of the enterprise. The main rule in this matter is that the manager has objective data about the current financial condition of the organization.

Thus, if an enterprise follows all three principles of cost reduction, then such an enterprise becomes profitable in short terms. The manager has a clear mechanism for managing incoming finances, the company stops attracting borrowed funds, significantly reducing the cost of interest payments. Managing and reducing costs is a constant process that is necessary for the development of an enterprise and entering new markets.

World experience shows that cost reduction is possible without radical methods of eliminating many costly items. In world practice, the entire system of cost reduction, including the gradual reduction of personnel, is built on the basis of the EDA (economic activity analysis) program. Such programs usually involve all company employees, from managers to ordinary performers. All labor processes of the enterprise are studied in detail and those that need to be automated or reduced routine, repetitive operations are identified. Based on the results of the AED, the organization receives a stable result, achieving a certain goal: the structure of the company becomes more manageable and mobile. At the same time, costs are significantly reduced, budgets are maintained and profits increase.

A similar effect is achieved by the process-based costing system (from the English Activity Based Costing (ABC)). At the same time, the main processes that result in the creation of a product and the costs necessary to organize these processes are identified. The main tool for reducing costs in the ABC system is the identification of redundant and unnecessary labor operations, the refusal of which will not affect the quality of the product. Quick application of this method is possible by analyzing all costs and identifying three main components: costs that cannot be reduced without loss of quality; costs that can be eliminated, while negative consequences inevitable; and costs that can be reduced without harming the enterprise. The latter costs are subject to immediate reduction.

The costs of raw materials and materials are the most significant cost items in production, which can be reduced by constantly searching for new suppliers who can deliver in the shortest possible time with deferred payment. Such suppliers, as a rule, are large market players capable of supplying high-quality raw materials. They appear on the market over a long period of time, so it is necessary to monitor the growth of small organizations and their mergers with each other in order to quickly navigate the market.

Reducing overhead costs is possible with a detailed consideration of each cost item. For example, in order to reduce transportation costs, you can reduce your own fleet of vehicles to a minimum and, if necessary, engage the services of a third-party trucking company. Many global enterprises operate on outsourcing terms, using the services of accountants, lawyers, business coaches under temporary contracts paid provision works This significantly reduces wage costs for maintaining a permanent staff. Reducing the cost of paying for mobile communications and the Internet is possible with an integrated approach: the list of positions that require such payment should be limited.

Distribution costs are an integral part of the financial and economic activities of any enterprise. The main goal of the manager is the rational reduction of production costs, that is, the elimination of any ineffective actions that can bring unnecessary costs and even losses, which are measured not only in monetary terms, but also in loss of working time.

Reducing costs at an enterprise is a logical process in conditions of economic instability. How to do this correctly? Step by step about effective methods reducing company costs - further in the article.

You will learn:

What types and options exist for cost reduction?
How to plan and implement cost reduction measures
What methods of reducing costs are most effective in practice?
How to reduce material costs
What are the benefits of reducing transportation costs?
How cost reduction strategies are chosen
What are the basic cost principles to consider?

Classification of costs in an enterprise

Effective and ineffective. Possible effective costs(refers to generating income through the sale of products for the production of which they were allocated) or ineffective (refers to tasks that are not related to generating income and involve losses). Among ineffective expenses are any types of losses - due to defects, theft, downtime, shortages, damage, etc. Therefore, you need to focus on reducing the amount of ineffective expenses. Therefore, it is necessary to establish acceptable technological costs, determining liability in case of violation of acceptable standards.

Another area of cost reduction is analyzing the effectiveness of auxiliary work using outsourcing companies in some areas. Involvement of third party contractors on a competitive basis– a real and effective option for reducing costs for medium and large organizations. Although sometimes it is more profitable to maintain your own departments compared to attracting third-party organizations, this situation is no longer considered the rule, but the exception.

Relevant and irrelevant. Any manager needs to monitor whether control and planning depend on his management decisions. If they depend, then such expenses are relevant, but otherwise they will be irrelevant. In particular, expenses during past periods are irrelevant because the CEO can no longer influence them through his decisions. And opportunity costs are among the relevant ones, so management should pay special attention to them.

Constants and variables. Variable, fixed or mixed costs are possible - depending on the level of production. Variable costs are directly proportional to the level of production, without affecting fixed production volumes; mixed costs contain both constant and variable parts. This separation ensures cost optimization – especially important condition to control fixed costs.

Direct and indirect. Direct or indirect costs are possible depending on the method of attribution to the cost of production. You can attribute direct costs to a specific type of product or service. This category includes costs for the purchase of raw materials, supplies, and wages of production workers.

Indirect costs do not have a direct connection with a particular type of product. Indirect costs include the costs of managing and maintaining departments to manage and maintain the enterprise as a whole. If an enterprise produces only one product, then all costs of its production and sale will be direct.

A checklist and a set of instructions for the manager that will save the company from ruin

A smart checklist and 18 instructions prepared by the editors of the magazine " Commercial Director”, will help you figure out how to urgently change the work of the sales department so that the results at the end of the year will please you and not disappoint you.

Where to start reducing costs in an enterprise

The first step is to classify expenses into clearly defined categories.

The second step is to determine which costs are subject to adjustments.

The third step is to plan and reduce expenses.

6 ways to reduce costs

1. Reduce labor costs

The provisions of the current domestic legislation allow companies to reduce both the number of employees and wages.

2. Reducing costs for materials and raw materials. To reduce the cost of purchasing materials and raw materials, the following steps can be taken by the enterprise.

– review of contract terms with existing suppliers;

– search for new suppliers;

– use of less expensive components whenever possible;

– helping suppliers reduce their costs;

– purchasing materials together with another buyer from one supplier;

– independent production necessary materials;

– introduction of resource-saving technological processes, contributing to savings on the cost of raw materials;

– giving paramount importance to the procurement process of materials and raw materials;

3. Reduce production costs. Let's look at questions that can be used to evaluate the effectiveness of cost-cutting efforts:

1) Lease payments:

– is it possible for the company to revise the terms of the current lease agreement?

– Is it possible to move to another room or building?

– is it possible to sublease part of the company’s occupied space?

– Could it be more profitable for a company to buy out the leased premises?

2) Utility payments:

– Is it possible for the company to have stricter control over energy consumption?

– does the company have the opportunity to implement more cost-effective processes?

– is it possible to transition to new conditions for paying utility tariffs?

3) Equipment repair and maintenance:

– is it possible to postpone it for a long time or short time certain work as part of routine equipment maintenance?

– whether it might be more profitable for the company to refuse the services of contractors and undertake equipment repairs on its own. Or would it be cheaper to hire a specialized organization if the company itself is responsible for ongoing maintenance?

– can the company come to an agreement with current contractors to improve the terms of the equipment maintenance agreement in its favor?

– is it possible to search for new service providers for the company?

4) Integration and disintegration

– Is it possible to reduce company costs through vertical integration with suppliers or customers, or through horizontal integration with other manufacturers?

– Is it possible to reduce the company’s costs by expanding the scope of its business to other parts of the production cycle, without working with related companies? Or would it be more profitable to narrow the production scope, part of the production cycle, or carry out auxiliary work out of the hands of another manufacturer?

5) Transport:

– Is it possible to limit the number of official vehicles?

– Can the option of outsourcing the functions of a motor transport workshop to a motor transport company be considered?

– wouldn’t it be easier to attract a logistics company (or a professional logistician) for the purpose of consultations on reducing transport costs?

How to optimize business expenses: instructions for managers

– is there data that confirms the compatibility of an increase in advertising spending with an increase in sales volume?

5. Additional measures to reduce costs. Is it possible to reduce company costs in the following areas:

– conducting development and research work;

– maintaining a wide product range;

– maintenance certain quality services provided;

– maintaining a wide range of clients;

– mechanization production process;

– increasing the level of personnel qualifications;

– careful selection of components and raw materials that meet specific technical parameters;

– speed of order fulfillment;

– organization of production;

– maintaining flexibility in the production process;

– maintaining the existing policy on maintenance of machinery and equipment;

– support of distribution channels for manufactured products.

6. Government support. Is it possible for a company to benefit from a certain government program to support entrepreneurship by next steps:

– lobbying for the adoption of relevant federal and local legislation;

– receiving subsidies and benefits.

Attracting borrowed funds: how to speed up the formation of company financial funds

What other ways are there to reduce costs?

1. Reducing tax costs:

– conclude an agreement with the individual entrepreneur.

– conclude agreements with legal entities. persons.

– organize a holding structure operating under a simplified taxation system.

– transfer management functions to a separate legal entity. face.

2. Reducing the cost of maintaining unused property:

– sell materials that were generated during the dismantling process;

– do not write off, but sell depreciated fixed assets.

3. Innovative cost reduction:

– introduction of more economical equipment and technologies.

– develop low-cost production.

4. Reducing costs associated with depreciation:

– transfer the property for repeated use of premium depreciation. The company has the right to write off up to 10% of the original price of a fixed asset as a lump sum as expenses of the current reporting period.

– reduce the period of use of the object by the time during which it was used by the previous owner for the purpose of calculating depreciation.

– proof of the repair nature of the work instead of modernization and reconstruction;

– recognition as an expense of the redemption value of the leased property, in the case of accounting for the object with the lessor.

5. Dealing with debt:

– implementation in any cases of measures to collect debts.

4 methods to reduce logistics costs

Revision of the work of the logistics service. The logistics of the enterprise is built on the principle of “it just so happens”, and not according to a pre-established plan. But even when organizing this work on the basis of a plan, according to experts, a quarterly review of the main functions in the department is necessary to determine whether any of them have lost their relevance.

Practice confirms that thanks to this review, many points of loss of time and finances for the company can be identified.

Thanks to the logistics audit, it is possible to critically. In particular, one company had several specialists on staff who translated the same type of invoices for customs and banks. Based on the results of consultations with the broker and the bank, a glossary of frequently used words was sent to customs, with the compilation of certain templates for translation, which made it possible to part with translators.

If you organize a logistics system in a company with a clear structure, understandable KPIs and control, these measures will allow you to get an immediately noticeable effect. Next, it is necessary to optimize individual functions of the enterprise.

Inventory management. It is necessary to calculate the required stock of warehouse stocks, the minimum safety stock, the volume of products that are in transit, with the development of delivery schedules and payment of bills. Thanks to this, it will be possible to significantly reduce associated costs.

Transportation planning. First of all, in order to reduce logistics costs, reliable transportation in terms of timing and safety of the cargo is necessary. Thanks to this, the transport can be used as a warehouse on wheels, with a significant reduction in overall storage costs.

To reduce transportation costs, it is important not so much to demand discounts from carriers as to competently plan for cost reduction. It is noteworthy that the most effective option To reduce transport costs, loading becomes 2 years. In 2nd place in terms of efficiency is maintaining stability of downloads according to schedule.

Choosing the right logistics service provider. In this matter, you need to take a critical approach to “old attachments”, conducting constant study available services and prices.

When summing up, it can be noted that to optimize logistics and reduce related costs, the main condition becomes systematic approach. In a company in which a holistic system can be established, training employees to constantly make plans, make decisions based on calculations rather than traditions, daily process improvements occur, and periodic audits involve only making minor adjustments, contributing to the achievement of success for the company. Experts from the School of General Directors will tell you more about accounting and division of expenses.

First of all, you need to start with optimizing the logistics department

Maria Isakova,

logistics expert, Moscow

Companies in most cases strive to optimize the part of logistics that is managed by counterparties. Often, such optimization begins with the transport component, negotiating with carriers and forwarders to reduce prices. But it can be clearly stated that it is impossible to achieve more from carriers every time. low prices, and the effect of such a decrease is reduced. To ensure maximum results, the beginning of a policy to reduce logistics costs should be the optimization of the logistics department.

Sample cost reduction plan

Cost reduction planning involves a set of activities divided by time frame:

Maintaining financial discipline. Measures are being taken to ensure compliance with financial discipline. In particular, a plan is developed, strictly following the approved data. Decisions made by the manager and recorded in the budget can only be violated in exceptional cases.
Organization of accounting. To systematically reduce the costs of an enterprise, it is necessary to implement a system of financial accounting and control. Not only costs, but also income of the enterprise are subject to accounting. It is necessary to carry out operational measures aimed at debt collection. Also, the enterprise itself needs to promptly make budget payments, and payments for staff and contractors, which allows you to avoid penalties.
Development and implementation of a cost reduction plan. The goals of the cost reduction program are to present the most detailed target values for cost items to be reduced. As part of these activities, it is expected to develop a plan for the entire enterprise, identifying weak points where cost reduction is possible, and for each structural unit to strengthen local financial discipline.
Carrying out inspections. In order to assess the effectiveness of cost reduction, it is constantly necessary to conduct independent monitoring, which will allow an assessment of natural loss, possible shortages, technological losses, with the necessary adjustments being made to the corresponding cost reduction plan.
Loss analysis. Any result, including a negative one, should be carefully rechecked to reduce further costs. It is necessary to analyze production losses that force the sale of products (services) at reduced prices. Defects, alterations and defects also deserve special attention. This not only leads to a reduction in production costs, but also to additional costs. Production interruptions and waiting for products can also cause increased costs.

What problems may arise during cost reduction?

It is difficult to identify the most important cost items that require reduction. These errors are typical for medium and small enterprises, because usually their management is well informed about the most significant expenses. But as companies expand and become more complex, they may encounter a situation where management may not notice increased costs in certain areas.
The source of the enterprise's costs was incorrectly identified.
Together with unnecessary costs lost their individuality, as a result of which the competitiveness of products, especially if it distinguishing feature was in quality.
Seriously damaged relations with the parties involved in the business
Reduced costs in important areas below the acceptable limit.
Misunderstanding of the enterprise's cost mechanism.

Lack of motivation

Konstantin Fedorov,

development director of PAKK company, Moscow 

When optimizing costs, enterprises usually use administrative leverage according to the principle “if you don’t cut costs, we’ll fire you.” Because of this, a situation arises when ordinary employees and managers of the company begin to sabotage the changes, either explicitly or openly. Moreover, many consider optimization a sign of the weakness of their leadership.

Advice. You should agree in advance how the company will thank all participants in the cost reduction program after its implementation. However, this gratitude does not necessarily have to be financial. In particular, you can think about a career advancement or other options.

Keep track of your expenses and they will decrease. Sometimes cost reduction can be achieved simply by taking it into account and understanding it.
Your employees are your like-minded people. You should convey to your employees the importance of cutting costs. You need to explain to them that you appreciate their cost-cutting suggestions.
Sort out your costs according to the degree of dependence on production. Accounting systems are mostly divided into variable and constant. Variable costs (direct labor costs, raw materials, etc.) depend directly on the volume of output. Fixed expenses(travel expenses, wages for management personnel, bills for water, heat and energy, etc.) usually do not depend on production volumes. Some companies have adopted a classification of variable costs depending on the ease of their adjustment when production activity changes.
Divide costs according to how easily they can be adjusted using alternative solutions.
Monitor not only the cost structure, but also the reasons for their occurrence. Thanks to this, it is possible to take the necessary measures aimed at eliminating the causes of unwanted increases in costs.

Cost planning and control – from prices to energy consumption

Walter Bory Almo,

General Director of the Ufa Meat Canning Plant

Our financial planning department processes all available information to plan and control costs - from ingredient prices to equipment performance and energy consumption. Constant analysis is the basis for further cost reduction. We divide the costs of our work into 2 categories - for some, significant investments are required, in the case of others, simple procedures will be sufficient. Don't give up simple solutions, thanks to which you can achieve tangible results with minimal expenses.

To analyze the results, we use the KPI system of key performance indicators. The data is compared with the results of five companies in our holding. It is not always possible to achieve results thanks to this information, because we are leaders in many indicators. Therefore, we are also collecting data on our competitors.

We also involve employees in our work to reduce costs. For any employee, thanks to whose idea it was possible to achieve a tangible economic effect, a bonus of 3 thousand rubles is allocated.

Information about the author and company

Maria Isakova, logistics expert, Moscow. She started her career as a logistician for Bayer. In 2001–2008 – head of the logistics department, since 2009 – head of the logistics and order management department of the Lanxess company.

Walter Bory Almo, general manager Ufa meat-packing plant. OJSC "Ufa Meat Canning Plant" is one of the leading enterprises in the meat processing industry of the Republic of Bashkortostan. It produces more than 150 types of food and technical products, as well as raw materials for the leather and medical industries.

Zoya Strelkova, Leading financial analyst, head of the “Company Economics” department of the group of companies “Training Institute - ARB Pro”, Moscow. Specializes in researching the economic state of companies, developing economic business models, strategic planning and other issues. Participated in the implementation of more than 20 strategic planning projects for enterprises various industries. Conducts seminars “Strategicity of everyday life. PIL-approach" and "Finance for managers". "Training Institute - ARB Pro". Field of activity: business training, HR consulting, strategic management, information support for business. Form of organization: group of companies. Territory: head office – in St. Petersburg; representative offices - in Moscow, Nizhny Novgorod, Chelyabinsk. Number of staff: 70. Main clients: Moscow Financial and Industrial Academy, Sberbank of Russia, Gazprom, Irkutskenergo, Svyaznoy, Ecookna, Coca-Cola, Danone, Nestle2.

Konstantin Fedorov, development director of PAKK company, Moscow.   CJSC "PAKK" Field of activity: consulting services, professional assistance in business development. Number of personnel: 64. Average annual turnover: about 110 million rubles. Completed projects: more than 1000.

Andrey Zinkevich - that in order to optimize costs, one should not cut salaries, but refuse unprofitable clients

IT tools used by Andrey Zinkevich

Evernote
Megaplan
Disqus

The difficult economic situation is forcing many entrepreneurs to sharply cut costs. But cutting cuts is different - there is optimization of non-strategic costs that is useful for business, and there is disastrous sequestration of cost items important for the development of the company. The founder of the “Attracting and Retaining Customers” project Andrey Zinkevich spoke about how to reduce costs without demotivating key employees and not compromising the quality of the product.

Entrepreneur, internet marketing specialist. Founder of the project "Attracting and retaining clients". Co-Founder and Community Marketing Director "Directors' Club". Author of several books on Internet marketing. Lives in Poland.

Think about expenses

Previously, when asked how to reduce company expenses, I would have answered without hesitation with my favorite quote: “Don’t think about expenses, think about income!” And I would suggest, first of all, to start with a review of the customer generation and sales system, and only then focus on reducing unnecessary costs.

But today is a little different time.

Many CIS countries, including Russia, are currently experiencing a serious economic crisis. The collapse of national currencies ranged from 50% to 300%, and along with this, household incomes fell. All this together dealt a very heavy blow to small and medium-sized businesses.

Therefore, in a situation where the number of customers and orders is falling sharply, it is time for any company to think about cutting costs. But this must be done in such a way as not to cause serious damage to your business, clients and employees.

Is it possible to cut costs quickly and painlessly? Let's talk about this.

Strategic and non-strategic expenses

Bob Phifer, author of Costs Down, Sales Up, has an excellent classification of costs. He divides all expenses into strategic (which ensure the company’s profit) and non-strategic (which ensure the work process, but do not generate income).

Phifer includes marketing (attracting new and retaining old customers) and bonuses for sales managers as strategic expenses. That is, targeted investments aimed at increasing the company’s sales and profits. Non-strategic expenses include office rent, purchase of office equipment and office supplies, salaries of administrative staff, etc.

surpass your competitors in terms of strategic spending, ensuring these expenses in any environment, both good and bad bad times;

ruthlessly cut non-strategic expenses, bringing them to the absolute minimum.

But, in fact, many businessmen do the opposite. Let's look at the three most common mistakes that entrepreneurs make when cutting costs.

Three most common mistakes
while reducing costs

The first mistake is cutting salaries

Cutting staff salaries is the first thing that comes to mind for many entrepreneurs. Why shouldn't this be done? At a minimum, because the employee will become angry with the manager, and his motivation will fall through the roof.

A salary cut always leads to the fact that the employee is in working hours will be busy not solving the company’s operational issues, but searching for additional income and new job. And as soon as he finds something more or less suitable, he will immediately leave you

It is more advisable to think about reducing staff, whose functions can be easily and painlessly outsourced, than about cutting salaries key employees. The latter will always remember that you care about them and will try to do everything possible for the growth of the company.

Mistake two - reducing investment in marketing

The second common mistake is reducing investment in marketing. Why can't this be done? A study was conducted in the United States that found that those companies that did not cut their marketing budget during the financial crisis ended up becoming leaders in their industries. The same companies that cut back on marketing investments lost both their market share and significantly weakened their competitiveness.

It is necessary not to reduce, but to optimize costs. And to do this, redistribute the marketing budget to the most profitable channels, abandoning ineffective ones.

Mistake three - deteriorate the quality of the product

Deteriorating quality means passing a death sentence on the product. The market has changed, competition has become tougher, and the client has become more educated. Today the client understands that he is a king. And it is he who makes the decision. Therefore, as soon as the quality of your product no longer suits him, he will immediately turn around and go to your competitors.

Instead of sacrificing quality, consider different pricing schedules and options for the customer. Want to reduce shipping costs? Increase the minimum order amount for free shipping. Does the client want to pay you less money? Reduce the number of services provided. But never, under any circumstances, degrade the quality!

In addition, there are effective ways to reduce costs, which we will discuss below.

Seven ways to quickly and effectively cut costs

Method one - refusal of the office

When I advise you to give up the office, many people look at me in bewilderment and twirl their finger at their temple. But let's face it. If your office does not simultaneously serve as a warehouse, showroom and sales point, then you can easily do without it.

Firstly, office rental and maintenance is one of the most significant items among non-strategic expenses. Just calculate how much you could improve your financial situation if you removed the costs of renting and maintaining an office (at least partially) from your cost items.

Secondly, you would save your employees a lot of time (which they spend getting to and from work) and money (lunches, coffee, transportation, etc.).

Of course, many entrepreneurs are not mentally prepared for such an approach. After all, they immediately have a question: how will the staff work without my control?! I’ll answer the question with a question: why do you even need employees who work only under pressure and only when they have a manager over their soul? Fire them!

Think about management by goals (I recommend Brian Tracy’s book “Motivation”), write down a strategy and step-by-step tasks for its implementation for each employee, use programs that allow you to teamwork and track the status of each process and task (Megaplan, Bitrix, Trello, Basecamp). Finally, tie employee salaries to results and meeting goals.

After all, I hope you are interested in the results?

Method two – outsourcing

Outsourcing - effective way significantly reduce costs. For example, if you have a lawyer on your staff, then you bear the costs of his salary and arrangement of the workplace. But if your business does not need significant legal support, then you can safely refuse a lawyer and enter into a service agreement with a good law firm.

There are several advantages. firstly, if something goes wrong, you can always file a claim with the company serving you, as well as apply penalties. Secondly, if your company also provides services that can be useful to a law firm, you can simply negotiate a partnership and barter exchange. Thus, eliminating unnecessary costs.

Method three - percentage and bonus for completing tasks instead of betting

The third way to quickly and relatively painlessly reduce costs is to transfer employees from a fixed rate to a percentage. But before you do this, you will need to familiarize yourself in detail with the functions and responsibilities of each employee.

If, for example, a sales manager or marketing specialist can be given a percentage of sales and plan fulfillment, then this will not work with an accountant or client manager. Calculate how many target actions the accountant performs (number of entries, preparation of reports, filing documents with the tax office, etc.) and set payment for each action or for achieving the result.

You may find that you don't need a full-time accountant (especially for small businesses). Then you can safely offer him to work for you and run several more companies.

Method four - abandoning ineffective marketing channels

In times of crisis, one of your key tasks will be to carefully analyze the effectiveness of each marketing channel. Look at achieving goals, ROI and payback period, the number of potential clients. Based on the received analytics, abandon unprofitable and unprofitable channels and redistribute their budget to more effective ones.

Method five - refusing unprofitable clients

You also need to be able to fire clients! And a crisis, like nothing else, is suitable for this.

Look at the clients that take up 80% of your time while bringing in only 20% of your profit. Do you really need them? Maybe you should focus on working with key clients and offer them a few additional services or products?

Just think about what would happen if you could free up 80% of your time resources and give up clients who are fooling you and ruining your nerves? I am 100% sure that after doing this you would find a significant portion of the costs that you can eliminate.

Method six – deferment of payments to suppliers

Consider which supplier your company is a serious and important customer for, and then contact them and ask for an additional deferment of payments. Many people are afraid of losing customers, so there is a high probability that your suppliers will agree to make a concession.

Method seven - audit non-strategic expenses

This is the easiest way to quickly reduce your company's costs. Analyze what the company's money was spent on in the previous month. Buying coffee and cookies, office expenses, consumables, calls on personal issues from a work number - all this can be safely cut down without demotivating employees.

Just announce to everyone that next month the budget for such items will be cut by 50% - people will understand this, especially if this does not affect their salaries.