15 Minutes to Increase Profitability

15 Minutes to Increase Profitability
Everyone likes to find forgotten cash in their pockets, right? One of the simplest, but often ignored, accounting best practices to save money is a basic review of your business’ expenses. Often as you are scaling your business, general and administrative (G&A) expenses invariably grow and sometimes expenses linger long after intended (e.g. an auto-renewed membership or subscription on a company credit card for a sales rep that was let go 18 months ago). Here are three quick steps you can take to perform a cost review:

1. Create a spreadsheet listing all Income Statement expenses by vendor YTD or for the previous 12 months (a standard export from most accounting systems)
2. Review vendors by total expenses and see what numbers jump out
3. Investigate further and see if any reduction is possible (or if there is an error that needs to be rectified)

We recently did this at TGG and with many of our clients. A few examples of things we found that provided immediate savings:

• A company noted increased Costco expenses for the company kitchen despite a primarily remote workforce and trimmed the budget back by 20%
• A company was paying $5,000 a year for basic website hosting (set up by a past employee) and reduced it to closer to $100 a year
• A company realized they were paying $1,700 a year in business subscriptions for employees that had not been with the company for a year or more
• A company was paying $3,500 a year for a former employee’s website hosting (a recurring fee on a company credit card)
• A company was paying $1,200 for additional software licenses that were not being used
• A company was spending $25 a week on paper towels and similar items, but not using the product. They instead had built up a huge inventory of paper towels, which they were struggling to store. We simply put a hold on these purchases (for 9 months!)

The lesson to learn is that the savings can be anywhere and often the issue won’t jump out on a monthly basis, but doing a comprehensive review annually will almost always bring results.

Key accounts that often hide “extra” expenses include:

• Office Expense
• Office Supplies
• General Expense (or anything similar)
• Dues and Subscriptions
• IT

Most companies are not going to find hundreds of thousands of dollars in unnecessary expenses with this type of review, but almost everyone will find at least a few thousand dollars in savings from investing an hour or two. The great part is all of the savings goes straight to the bottom line. Everyone loves found money.


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