Download Grogan Ryan - Control Costs

Business Conditions –
Worst Since ?
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Records Began ?
The Great Depression ?
The Founding of the State ?
The 1970’s
We last won a ‘Grand Slam’ ?
Getting Started – What
are my costs?
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‘Need Good Business Management Information’
Turnover v Bottom Line – Change of Focus
How do I get this information?
Get Last Years Accounts – either 2007 or 2008
List all Income & Expenses on Spreadsheet
Jan & Feb 2009 input estimate
1. Accounting System eg Sage
2. Cheque Stubs
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Produce Monthly Income & Expenditure
>
XYZ TOOLS
Monthly Income & Expenditure Account
Last
Years
Jan
Feb
Accounts
Mar
Sales
250,000
16,667
13,333
Cost of Sales
145,000
9,667
7,733
Gross Profit
105,000
42%
7,000
42%
5,600
42%
22,296
30,000
5,000
4,000
5,200
2,000
2,000
2,500
3,000
5,000
1,500
2,500
3,750
1,858
2,500
417
333
400
200
0
368
275
350
125
267
313
1,858
2,500
417
333
300
100
150
250
300
200
125
213
313
88,746
7,405
7,059
16,254
(405)
(1,459)
Less Expenses
Wages & Salaries
Rent
Rates
Insurance
Light & Heat
Repairs
Computer Costs
Printing & Postage
Telephone
Motor Expenses
Accountancy
Bank Charges
Depreciation
Profit / (Loss)
0
Cost Control General Tips
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Becoming an Expert on each cost
Line by Line – One at a time
Mind Set – Intolerant of losses
‘What am I getting for spending this Money?
Owner must sign every cheque
Watch Bank Balance Constantly – Weak Cash
Flow is greatest source of business failure in
recession
Working Capital –
Cash is King
 Reduce Stocks to absolute minimum
 Stock Disposal Programme for old Stock –
Turn into cash
 Accounts Receivable – proactively manage
to reduce - offer early payment discounts
 Obtain cash discounts for payments
 Vital – Produce a Cashflow Statement
XYZ TOOLS
Projected Cash Flow
March
Actual
April
May
June
July
Sales Receipts
8,000
4,500
5000
Less Expenses
Purchases
Wages & Salaries
Rent
Rates
Light & Heat
Repairs
Computer Costs
Printing & Postage
Telephone
Motor Expenses
Bank Charges
Purchase PC
4,000
700
0
0
400
200
0
368
275
350
267
0
7,734
1,858
2,500
500
300
100
150
250
300
200
213
0
5000
1858
2500
500
300
100
0
250
300
200
213
1000
6,560
6,371
7,221
Net Inflow / ( Outflow )
1,440
(1,871)
(2,221)
0
Opening Bank Balance 26/03/09
Net Inflow / Outflow
Closing Bank Balance
1,250
1,440
2,690
2,690
(1,871)
819
819
(2,221)
(1,402)
(1,402)
0
(1,402)
Control Cost of Sales
2008
Sales
€
250,000
Projected
A
€
180,000
Projected
B
€
180,000
Cost of Sales
145,000
116,000
98,600
Gross Profit
105,000
42%
64,000
36%
81,400
45%
(41,000)
(23,600)
Decline in Gross Profit
Sales Units down 20%
Sales Price down 10%
Banking Costs
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Banking On-line – Watch Balance
Pay on-line
Credit Card Charges- Negotiate fee
Promote Laser Cards
Referral Fees €4.44 per item – Try & work
within Agreed limits – eg 18% unapproved
overdrafts – v 1.5% ECB rate
Light & Heat Costs
 Consider Other Suppliers
BordGais/Airtricity/Energia –
10% to 12%
 Understand bills- Wattage –
What are you paying for?
 Energy Saving Bulbs – 95%
Telecomm. Costs
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Become an expert – (Again)
Understand Tarriffs
Mobile to Mobile – Yes
Landline to Mobile - ?
Number of Phone Lines – Rental of 1
Phone line €21 per month = €764
gross sales at 42% margin
Marketing /
Advertising Costs
 Print v On-Line
 E- Shots
 Consider outside help – Marketing
expertise
 What am I Getting for spending this
money
Insurance Costs
 Business Insurance to trend upwards
again
 Watch Valuation of Buildings
 Watch Stock Valuations
 Watch Turnover levels
 Watch Employee Levels
 Talk to Broker and become Expert
Rents - Premises
 Sub-let part of unutilised premises
 Try to renegotiate existing leases
even if some way to go - 20%
reductions becoming commonplace
 Good tenant paying reduced rent
better than no rent - Landlord costs
down
Accountancy Costs
 Get Quote each Year
 Move to Audit Exempt if company
 Discuss what info you can provide to keep fees
down for upcoming year
Drawings / Directors
Salary Costs
 Apply same techniques at home to
drive down one of your businesses
biggest expenses - Yourself
Conclusion
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Don’t Panic
Put in Place Estimated Monthly P&L
Know Your Costs – Review Line by line
Know your Break even
Know your Cash flow
Become lean, mean and ready for the
upswing