Accounting - Purchasing/Cost Control
Eliminate the Overhead!

Eliminate the Overhead!

Overhead is a Threat to Your Survival!
A low-cost structure is essential for being competitive, and low overhead is crucial for this. Overhead costs don't directly make your product or deliver your service. They don't directly benefit your customer. Overhead just adds to your cost structure and makes you less competitive.

Overhead is like government bureaucracy--it just grows and grows. And the more it grows the harder it is to see its benefit. Once you add an expense to overhead it's hard to take it away.

Unfortunately, too many employees love overhead! They love nice desks; they love new computers; they love new buildings; they love deep carpet; they love nice offices! But all these trappings of success are just that--traps--and each and every overhead expense threatens every company and every person that works there.

Get Rid of the Office!
There was one move I put off making for several years that by itself chopped our overhead to shreds and gave us a huge competitive advantage. I delayed moving to a commercial office.

For four years I operated my book publishing business out of my basement apartment. This wasn't just a one-person office. I had up to seven people working there. And we also used it as a warehouse. I'd have neighbors move their cars so semitrailers could back down the driveway. I'd open the large kitchen window to load books in and out. I remember one night waking up to find that a pile of boxes with books had fallen on top of me while I slept.

My MBA friends laughed at this low-budget business setup, but today no one laughs at the 100 percent equity I hold in my $10 million business.

Don't Get Seduced by Technology!
It's incredibly easy to get seduced by the latest advances in high technology and by expensive equipment that you either don't need or could make do with a less expensive version.

Years ago when I was running a busy newspaper sales office, I was shocked to see how expensive multiline phone systems were. So by our reception desk on the first floor I installed six single-line phones for incoming calls and installed six matching extensions on our second floor, using an intercom to announce incoming calls. It looked very crude, and it was appallingly unprofessional, but it worked, and it saved us a lot of money.

Today, the backbone of our accounting system is still an ancient IBM system 36 computer. But I was a lot less embarrassed about this relic in our office when I saw one in operation at the leading wholesaler in our industry.

Try Selective Upgrading!
Personal computers and related software can be a significant expense for a small business and even for a larger one. Often a firm will decide to unilaterally upgrade all of their PCs and software. But there is very little volume savings on PCs and usually not too many savings on software--in fact, I've seen some software site licenses that are more expensive than buying multiple copies off the shelf.

So I would suggest that you look at who really needs the latest and most powerful PCs and who really needs the latest version of an expensive software package. Usually software versions are backward and forward compatible anyway.

But don't skimp by not buying the appropriate software licenses. You could be subject to massive fines and embarrassment if you don't have a software license, not just for each package, but for each PC the software is installed on.

Turning Garbage into Greenbacks
Most companies spend a lot of money getting their waste hauled away. But my company makes a lot of money getting its waste removed!

I would like to tell you that this was a result of my brilliant insight, but that would simply not be true.

As we went through one of our perennial cash crunches a couple of years ago, I got everyone together and said,"Don't panic, we're not going to cut jobs--but we do need everyone's help to cut costs. And we'll give some small cash awards for the best suggestions."

Well, sure enough, most people panicked anyway and told one another we were about to go out of business. But they still liked the cash award idea, and we got lots of great suggestions--including the "money from wastepaper" plan from some of the hourly guys in the warehouse. These fellows directed us to a paper converter who would not only pick up our paper waste for no charge--but also pay us thousands of dollars for it.