CEOs are trying to do two things in this economy: raise revenue and cut costs. Revenue and costs are two areas that can be managed well to make more money. Most of the time, ordering one and not the other can cause headaches and stress. In some cases, you may have to close the doors.
It’s easy for CEOs and business owners to focus on making more revenue. There are many things you can do to make more revenue: build a better widget, sell more big-ticket items, and improve your competitive edge.
For many people, controlling and cutting costs is an afterthought or even a distraction at times. Costs that are directly linked to revenue are usually looked at very closely. These costs include materials, sales, and labor, and they all add up. There are, however, some costs that come with “running the business” that can be easily overlooked. These include payroll, A/P, A/R, human resource management, and records management.
If you don’t control or keep an eye on these indirect costs, you usually end up with many problems, such as more waste, more fraud, inflated labor costs, and more wasted time. Here are some ways a CEO or business owner can better manage and save money immediately.
1. Use a “Method” to Save Money
One of the first things you can do to get more control over any activity you or your business is doing is to use a method or system to do that activity. Rather than just going through the stack of papers randomly each time you need something, you could organize them alphabetically by subject so that you don’t have to go through the whole thing again and again. Doing this lets you quickly find what you’re looking for every time you open that stack of paper.
When you alphabetize the papers, it will take you seconds instead of minutes to find what you need instead of hours. Count how much money you save each time you search for something, and then figure out how much your time costs. You start to see that alphabetizing your papers can save you money in the long run.
Alphabetizing papers is just one example that everyone can relate to. It shows how inefficient it is to start a job without a process that helps make the job easier.
Business process management, or BPM, is when business activity is done the same way every time. In the example above, the paper doesn’t magically alphabetize itself, so a process must be put in place to make sure the form is stored in the correct order.
Automating a process can be one of the fastest ways to cut costs. That’s right; it costs money. Automation can save more than just money on labor costs if it’s done right. Automation can also cut down on the costs of fixing problems with a process because it doesn’t have human error or other variables in it. Automation will also help to find waste and use resources more efficiently.
To make sure we’re on the same page, let’s say that automation doesn’t mean that you’ll be able to cut your workforce in half. It means that your employees will focus more on their work and get more done in less time because of it.
Automation doesn’t mean installing robots or spending a lot on extensive, complicated computer systems. It doesn’t mean that. An automated process can be straightforward, like making a macro in Excel, or very difficult, like setting up a new document imaging platform. In both cases, you should figure out where time and materials are saved and how that can be worth money.
It’s not the same thing as automation to think of technology as the thing that makes things happen. As we said earlier, automation could be as simple as using Excel to figure out how much materials you use or an Access database to set up a simple workflow tracking system. In a manual process, you can’t get as much information as with technology.
Using the right technology for the right job should improve quality, speed up work, and reduce waste. Technology should not be limited to just being the engine that moves position through the steps to processing improvement. It can also be used to bring work into the system (e.g., scan a paper document or get an email) and remove pieces from the system (e.g., send an email) (e.g., print fulfillment or output data interfacing)
There are a lot of different kinds of technology out there. Still, the right one should make things easier for your employees and start putting together valuable data about how well your company is running its core and administrative processes.
To improve a process, it is essential to have the correct information. No matter how that information is collected or put together, it doesn’t make a difference. What is important is that you have all the information you need at your fingertips so that you can figure out how much your processes will cost in the long run. In your job as CEO, you already know how to do this kind of monitoring with financial data, market data, and when you look at key performance indicators from your primary business.
All the people who work for your company should find out about all the things that happen in your business. For example, office managers, purchasing managers, and warehouse managers can do the same kind of analysis you would pay for your business as a whole but at a level that fits their area of work. Your stakeholders have the information to make intelligent decisions about essential process changes. When they make changes, they can see the benefits (or not). This helps them start getting rid of process flaws and costs.
5. You own the ownership.
People who work on your ownership now have the information they need to keep an eye on their work.
They will start to feel more responsible and accountable, rather than just managing the status quo. Process stakeholders who feel like they are contributing to the company’s well-being spend more time thinking about how they can save the company time, money, and other resources, rather than managing crises and cost overruns, like they do when things go wrong.
Sometimes, it can be challenging for a CEO to give up some control over certain things. I must approve all new hire requisitions if they cost more than $1,000. If you do this, your company will not be as quick as it should be. If you let your managers do their jobs, you can do yours, too! You find it much easier to give your managers ownership of your work when the method, technology, and monitoring are already set up and ready to go.
When you change how your business runs, there is always a cost (i.e., implementing a process change). Any change in how things are done should be looked at for the costs and benefits. The more significant the difference, the more in-depth the analysis. It can be hard to figure out how a process changes. Waste and poor quality can make it hard to figure out how much cost you’ve saved by not having to use your time and resources.
You get closer to figuring out the actual cost of the improvement by implementing a method, automation, technology, monitoring, and ownership. This gives you the information you need to make the right decisions. There is a lot of time and money that goes into process improvement. In some cases, the cost of process improvement is already built into the project. Keep your long-term goals in mind, and don’t give up on a process improvement project too soon.
These ways of cutting costs have worked for a long time. There are many different ways you can run your business, as well as software and hardware that can help you run it more efficiently. CEO: You have to start the change process.