Saving is key for anyone who has the vision of growing themselves. It is not very easy to do it, but with discipline and determination, it is achievable. Increasing profits through cost reduction must be based on the concept of an organized, planned program within any organization or as an individual. Unless adequate records are maintained through a proper accounting system, there can be no basis for ascertaining and analyzing costs.
Reducing costs is not simply attempting to slash any and all expenses unmethodically. It is important for an individual, the owner of the company or the manager to understand the nature of expenses and how expenses inter-relate with sales, inventories, cost of goods sold, gross profits and net profits.
Cost reduction does not mean only the reduction of specific expenses. You can achieve greater profits through more efficient use of the money generated by the organization. Profit is in danger when good merchandising and cost control do not go hand in hand. A big sales volume does not necessarily mean a big profit, as one retailer.
Here are some ways in which one can cut down on costs and expenses so as to save:
Work out what your cash is spent on – What you will need first, is a clear idea of where your money is going, then you can look at ways to cut fluff and lower the cost of your required living expense. Always keep in mind that it is not just about cheaper; it is about efficiency. Analyze your needs and do the math. Most importantly, understand that reducing expenses is a lifestyle change and a change in your thinking patterns. Never let yourself believe that pennies do not count.
Determine where you spend your money – If you do not know where your money is going, you are most likely spending too much. You can get a solid idea in as little as one month and as you continue, you will see patterns develop that you can address. It is advisable to be noting down your spending routine. This will include things like rent, transport, food, school fees among other spending. If you only use a debit card for your purchases, the bank will do this for you.
Maximize your employees’ skills – Assess the current usage of employee experience and skills. Give responsibilities to the employees with the most skill and efficiency in those areas. Don’t use expert sales people for word processing or “numbers” people for design functions. It’s often necessary for one person to be responsible for a variety of tasks, but consider exchanging some of those tasks with another individual who shows greater efficiency.
Take your own lunch to work – Most of us tend to be spending too much money on our daily lunch when at work. It will be very cost effective if one embraces the culture of taking their own packed lunch and warm it when that time comes. Packed lunch will save the 500 shillings that one might be spending on a daily basis for lunch since the food may be leftovers from the previous day’s dinner.