6 Common Mistakes
6 Common Mistakes – Getting Started
1st Mistake: Is not knowing exactly how much your company is currently spending. In any business it is highly beneficial, as well as extremely convenient, to measure the costs of each and every department separately. The thinking behind this is, by making individual departments fully responsible for their own costs, you are pinning responsibility directly on those who are spending the money and inflicting these costs upon the company. Implementing an overall strategy of measuring how much you spend is vital, as it allows you to fully understand the true spend in each area and to negotiate accordingly with your suppliers.
2nd Mistake: when reducing costs is not knowing how much your company should be spending. First of all, what do I mean by the “correct” amount? I have heard many clients argue that it is subjective and claim that the amount they are spending is the right amount for their company for various short-sighted reasons. They might claim that they don’t mind spending £35,000 on their annual electricity bill because they have always done so. A lot of businesses harbour a “Because we always have!” attitude. A company might also be happy with their high costs because they see it as being relatively cheap compared to some of their other costs.
3rd Mistake is not knowing exactly what you want to buy. The large mistake here is the lack of communication between different levels of the business. For example, imagine that I have gone shopping because I need to buy a new wallet. This may sound like a simple enough task, but there are a multitude of things I have to think about to ensure that I come away with a wallet that satisfies my needs. To list a few: colour, size, and material. Now imagine that someone else is going to buy this for me. So something that at first seems relatively straightforward actually requires a fair amount of information. If you translate this to something more complex, for instance an extensive cleaning project of a large school, you can see the importance of knowing exactly what you want.
The 4th mistake made is not regularly measuring your usage. Anyone involved in using electricity, gas, water or oil needs to know how much their individual usage is costing the company and then needs to be given a target to reduce it immediately if it is found to be excessive. It is usually possible to reduce utility usage by up to 20% by altering human behaviour, as human beings have a natural tendency to be wasteful. Remember this includes all staff equally.
5th mistake made is not taking action and not resourcing. Cost reduction, much like holiday planning, is a proactive task, not a reactive task. Reactive tasks are prioritised because you simply cannot afford to ignore them at that precise moment. On the surface, proactive tasks do not demand such immediate attention, but if you are serious about reducing your costs you need to take action now otherwise you will never find the time. It will be too late. The most effective way of dealing with these issues is to outsource the cost reduction process to an outside company. By doing this, you can happily focus on dealing with reactive tasks and running your core business. It allows you to WORK SMART!
Our final 6th mistake is made when reducing costs is not communicated clearly. You need to be asking the right questions of the right people. The idea is to be in a position where you have all the relevant information necessary to make informed decisions on a wide array of issues, such as defining the specification, motivating your staff, dealing with your suppliers, measuring consumption, creating a cost reduction team, working out what your customers expect from your product or working with an outside company. For these reasons, improving your communication skills will help you enormously in dealing with every single one of the five other common mistakes shared recently.