Reducing Costs in the Finance Department Through Technology

Reducing Costs in the Finance Department Through Technology

reducing the operating costs of finance department

This can mean no longer sending out paper mail unless specifically requested by the customer. You can also switch from paper communication inside the office to electronic communication; same with the way files are stored. This will eliminate the need to have as much inventory on hand and will keep your company costs lowered. Another common operating expense you can potentially cut is marketing costs.

Most focus on centralized processing to minimize costs in these operations including many finance functions such as invoicing, collections, purchasing and reporting, to name a few. You should outsource any work that does not require the attention of a full-time employee. Some things that your retail business can outsource are data entry, social media, and stock take.

Maintaining a stable employee core is the key to effective cost-cutting. It’s sometimes possible for a company to achieve a volume discount or «price break» when purchasing https://personal-accounting.org/ supplies in bulk, wherein the seller agrees to slightly reduce the per-unit cost in exchange for the buyer’s agreement to regularly buy the supplies in large amounts.

Cut employee benefits and perks. For instance, if you typically spend a large sum of money for office parties once or twice a year, you may be able to make substantial https://personal-accounting.org/faq/ cuts to the budgets of these parties or eliminate them altogether. Other cuts you may be able to make are club memberships, car allowances and bonuses.

Outsource all that work to companies abroad that will work for a fraction of the money you will be paying locally. These companies cost way less because of the lower cost of living of the country they reside in (i.e. India). It also may be hard to find the right people for the job. So why bother with all that?

reducing the operating costs of finance department

Bookkeeping mistakes are also a huge problem that may get you in legal trouble or cost you fortunes. You can avoid all of this by outsourcing your bookkeeping processes to a company abroad (i.e. India). It is easier and will cost you way less money. Alot of companies abroad have bright minds that are willing to work for less wages than the ones you will be paying locally.

In this age of Skype and Google Voice, do you really need to pay hefty bills on mobile and landline usages? Similarly, you can embrace technologies like Google Drive or BaseCamp to centralize documents and file storage instead of using paper documents. That’s a smart way to get rid of the costs associated with printers and paper-works. These are a few ways that your business can reduce operational costs, so if you want to find out more about how business process management software can transform the way you operate, why not book a free demo of Tallyfy’s software and we can demonstrate just how much your business will benefit. This is another area where you can reduce operational costs at the same time as generating other benefits for your business, and in this instance, the planet as a whole.

Let’s say annual operating costs are $100,000. You take advantage of paying invoices early and save 2%. You could end up saving $2,000 a year by doing so. Be sure to compile accounting services an accurate scope of work or request for proposal (RFP) for vendors to bid on, as missing information or added complexity can significantly affect the quoted rate.

Instead of having a 40 hour a week employee do this, have a contractor do the same thing. They may be able to complete it for you in 5 hours. That saves you 35 hours of pay a week right there.

  • By automating repetitive tasks, you can save hours of manual efforts every day.
  • Profit-and-loss (P&L) statements were reported only for product-based business units, even though geographic sales units had higher costs.
  • Can you find another material with similar performance, preferably identical, that can replace those already being used by the company?
  • The total operating cost for a company includes the cost of goods sold, operating expenses as well as overhead expenses.

It is a pretty simple concept. But what if most of the money we spend can be saved? Every company has the potential to reduce their expenses through saving money on tiny details no one bothers with. Not only some methods may reduce your expenses, but also drive up productivity of your employees. Instead of buying new laptops, computers, faxes, or any electronics in general, you can buy slightly used ones for way lower price to cut costs and expenses.

To manage costs at the necessary level of detail, the CFO of the company above gave each business unit head and controller full access to a centralized cost database linked to the official P&L. Each controller received a standardized template to record any adjustments affecting the baseline, along with exact amounts, periods, using accounting software and offsetting adjustments. The CFO then aggregated the data into a simple cost-tracking report that he shared with all involved. One multinational capital goods manufacturer combined the two perspectives, analyzing the major categories of expenditure and developing targets based on both internal and external benchmarks.

Finance is – obviously – an area where you can reduce operational costs simply by running more efficiently. If your business regularly pays invoices late, this can incur late fees and penalties, which is an unnecessary cost, particularly as many companies will offer a discount if you actually pay earlier than required. This is particularly helpful for small-to-medium businesses, who may not have the requirement for a full-time marketing or communications resource, and find it is more cost-effective to budget for a part-time or hourly-rated resource.

Don’t let P&L accounting data get in the way of cost reduction

reducing the operating costs of finance department

I can’t compete with a high-performing public company like Facebook or SalesForce on salary, but they can’t compete with me in my ability to award employees with ownership in the business. This has the added benefit of aligning them with the long term success and values of the business. You’re setting yourself up for failure if you hire people who care about their salary more than about having a meaningful role in creating something new or experiencing an accelerated career development. I think it costs us approximately $50/month/user.

Make a list of potential tech-based solutions in multiple areas of your business, from shipping products to managing your marketing campaigns. Some tools may not only make your life easier but allow you to free up the cash you’d normally use to pay the person who’s currently doing that work. Outsourcing some of your key functions can help you set a consistent budget for operations, allowing you to reduce overall costs. For instance, a recent study found that 96% of businesses who used IT managed services ended up saving money.

Mapping costs against business units and geographies will reveal both opportunities for cost reductions and areas in which the business should increase its investments to take advantage of growth opportunities or to “double down” in high-ROIC businesses. At a high-tech company, for example, the granular mapping of R&D spending by product families identified some that despite their aging technological and growth profiles were still receiving R&D and marketing investments. Clearly, these low-ROIC businesses did not warrant a high level of new resources. Management could redirect them to growth units because it was able to map costs at a very granular level. Companies spend a lot of money on operating costs every year.

reducing the operating costs of finance department

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