When going gets tough, it’s time to adapt your budget

LAST week we spoke about organisational structure reviews and how important this is when business is tightening or the economy is slowing.

Being adaptable will put you ahead of the game and competitors. Most well-run businesses are setting up their 2014 budgets.

This is an ideal time to address a key cost centre of your business - the overheads!

While speaking to a client about how difficult things had become in their industry, their business manager chimed in to say the budgets were complete.

When asked about the overheads and how they were arrived at, she said she adds 5% to them all in order to finalise the budget.

That's 5% on last year's figures. I asked why? Did she think this year is going to be 5% better?

This is obviously the best way to cut the corner and miss out on a serious overhead efficiency dividend for the business.

Sometimes it's even worthwhile having incentives in place for business or administration managers to identify savings from the review and questioning of each and every overhead.

So many things get taken for granted. In one case recently we commissioned a report from Telstra for a business that had nine incoming lines and seven outgoing.

The report found only once in 12 months had they had all nine incoming lines in use and they had never used seven outgoings at once!

Once things were streamlined the saving turned out to be more than $1000. You only need a few of these and the Christmas party pays for itself. Just joking!

However the point is that expenses such as these can and often do provide improvements to the bottom line of the business.

Even asking the bank to review their services and ask how these can be streamlined to obtain a better value outcome is possible.

We recently identified overhead costs savings of $150,000 for a client. Savings in overheads fall straight to the bottom line.

All businesses should review this area on an annual basis. There are many areas within overheads that can save a business money.

Topics:  accounting budget business

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