“If you want to get results you need to control your costs”
What does that mean? And how do you do it?
Simply, it means looking at what you’re spending money on.
You need to do this regularly. It should be part of your end of month process so that you get into the routine of checking your numbers.
How do you know if you’ve spent too much?
Your gut will give you a pretty good idea. But there’s other ways too.
Did you do a Budget?
First let me ask, did you do a budget? I keep talking about budgets and there’s a really good reason for that. Budgets help to keep you on track. They help you to know when your costs are blowing out and if you’re looking at it every month then you will spot problems and potential cash pits before they get out of control.
I have a confession… I love stationery. Good pens and all those pretty coloured ring binder folders and the bright highlighters. I love it all. And I buy way too much of it. At least I did until my spoil-sport budget told me to rein in my spending. OK, so it was getting a little bit out of control. I mean, who really needs 5 different types of post it notes, even if they were in lots of fun shapes? I’m a ‘less paper’ office for goodness sake!
But I was reviewing my figures a couple of months ago and noticed that my printing and stationery expenses were a bit over budget. And had been every month for a couple of months. No big deal, a one off each time. But when I looked at the year to date total is was waaaaay over budget.
So I stopped. I had to. When I actually looked in the stationery cupboard it was pretty clear that I wouldn’t have to go stationery shopping for a couple of years unless I wanted to get a new cupboard. Well, not quite but you get the idea. But without the budget I probably wouldn’t have noticed the creep.
Look for big variations from one period to the next
The other thing you can do is compare this months spend to the same time last year.
How much did you spend on advertising, for example, last November compared to this November? Was it higher or lower? Why? There will always be variations but you should be able to explain them. You should also look at the trend over the last couple of months and see what your expenses are doing.
What you’re looking for when you check your figures each month is big variations to your budget and to your previous year.
Review your expenses line by line. Are they too high? Too Low?
You should also look at each of the expense lines to make sure you know what every expense is for.
You’re looking for large amounts and then you’re going to check why they are so big. You might already know. For example, car rego was last month so motor vehicle expenses are higher than normal. And you might not remember spending anything on cleaning until you look at what makes up that expense. Perhaps some personal expenses were included by mistake, or maybe you had to get some special stuff to clean graffiti off the front door and you’ve blocked it out, it was so horrific!
You’re also looking for expenses that are too low. If rent is lower this month you know that something has gone wrong. Either the rent didn’t get paid, it got paid but wasn’t recorded, or it was recorded in the wrong spot. Now’s the time to fix all those little mistakes instead of the end of the quarter when they might get missed.
What are you paying for that you no longer need?
You need to regularly check for things you might be paying for that you don’t need anymore.
That software subscription for a program you thought would be really useful but you only actually used for a month. I’m guilty of that one. Are you on the best phone plan? Can you cut your stationery costs by using electronic filing instead of paper filing? Can you find a cheaper supplier for your materials, or negotiate a better price if you pay early?
Take little steps
These are all things you can and should do. You don’t have to do them all at once, but if you’re looking at your figures every month you can gradually work your way down the expense list and over time dramatically reduce your costs.
Listen to your numbers, read their story and watch your business Bloom!