How you can make your company more profitable! [Part 1] June 18, 2009Posted by solutionsbconsultants in Business Improvement, Increase Profitability.
Tags: audit, CFO, company, COO, expenses, internal controls, money, President, Procurement, reduce costs, spend, spend management
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Everyone wants to reduce costs and expenses. Here are some self-help steps that you can do yourself (for free!) – perfect in these tough economic times.
In a recent Linked-in poll, we asked companies, “What is the best example of wasteful spending at your company?”
Two-thirds of the Linked-In respondents answered, “the wrong person in charge”.
If you think of who buys goods and services or approves expenses at your company, how can you tell if they are doing a great job?
The best way is to ask questions….
1) Are they frugal?
2) Do they bid out goods and services?
3) Do they partner with suppliers?
4) Are they on the lookout for new suppliers and new ways to accomplish processes?
5) Do they negotiate with suppliers?
6) Are they strong enough to say no to bad purchasing ideas?
If they are not taking advantage of some or all of these protocols, you have just identified several ways to help your business get on the right track.
We have interviewed department heads who are in charge of ordering. Most tell us they are “too busy” to shop around. Oftentimes, there is an administrative assistant in charge of procurement who lacks the ability to properly specify what is needed and does not posses the ability properly evaluate suppliers and their offerings.
We have also found wasteful spending occuring by employee(s) who are funneling business to a supplier that oftentimes takes them golfing, or treats them at restaurants or clubs.
This is not an exhaustive list and most businesses would be shocked to hear many of the stories that I have encountered.
Most bad purchasing methodologies can be traced to poor or no training and oftentimes, senior executives forget that spend management is a science, has to be learned and has a specific rule set that one should follow to make sure that your company is being taken care of in the best way possible.
The Second most popular item in our Linked-in survey was insufficient internal controls. Spending company money should not be easy and should have a multi-level approval process that ties in with the company budget for that particular spend. Additionally, there needs to be a responsible party who reports to the CFO, COO or CEO. This person must be accountable for the smart and efficient spend of company funds. This person should have the ability and authority to discuss and question all company spend, make sure there is adherence to budgets and oversee requests for budget overruns.
Finally, there needs to be a strong audit committee. Lack of internal controls have led to abuses that occurred not only at Enron but also at companies of all sizes – oftentimes causing catastrophic damage to the company.
I hope these “self-help” ideas have been useful. And if you have a particular situation that you would like to discuss, I would be glad to take your phone call or answer your email.
Solutions Business Consultants are specialists in cutting costs and expenses without sacrificing employees™. We take an enlightened look at a company’s spend and create innovative cost savings methodologies which bring money to your bottom line!