Hopefully, the first week of January went well for everyone as we started plowing through the first quarter of 2023.
When I start to work with a small business helping them create strategies, one of the first things I discuss is back to basics. One area is variable costs like the cost of goods sold (COGS).
COGS are expenses that vary in proportion to the volume of goods or services you produce.
Some areas to review that could help reduce your cost of goods and therefore increase your profit.
- Audit vendors/suppliers – do you need new quotes or different suppliers? If we have the same program and terms as a few years ago, don’t assume that it fits today.
- Do you need to cut back on discounting? It may be time to review the strategy and adjust. Remember, what we did yesterday might not work for today.
- If this applies, reduce the rework of labor or waste
- Reduce warranty work or replacements (It takes profit away)
- Can you limit travel and meet virtually? If employees are traveling for business, they should fly coach and stay at 3-star hotels.
- Financial – review account receivables. Is cash being collected on time, and do you need to review payment terms for 2023?
The list could go on, but this hints at possible areas to save money in 2023.
Some sound simple, but you would be surprised by the possible dollar savings in focusing on the basics.
- Keep things simplified
- Stay focused
- Execute for results