YES/NO We seem to stick to the same supplier and trust that they're giving us value for money.

MAJOR AREAS OF COST CONTROL

The main areas where costs can be rationalised include telecommunications, business travel, energy, freight, couriers, mail, office supplies, reprographics and stationery as well as cleaning, merchant card services, maintenance contracts and document storage, but of course the list is endless.

Though when reviewing ov

Cost cutting and profit increases can amount to much the same thing if handled correctly. Cost cutting does not necessarily mean the slashing-and-burning of budgets on a 'let's-see-if-this-works' whim, nor does it mean the intense scrutiny of entertainment expenses in August, before reverting to three-hour lunches in December.

But what if a company could save 20 per cent a year on its stationery spend? Or 26 per cent a year on its courier costs? Or 76 per cent annually on its printing bills?

Wouldn't that represent real savings - and an increase on the bottom line?

The truth is that a significant cause of poor business performance in Australian companies is the lack of attention given to the cost of running the business.

The reasons for this lack of attention are many, but here I am going to focus on three of them. The process of cost management and review can be difficult to manage. Tough-minded resolve is usually required, and cost-reduction initiatives are not always positively received by colleagues and staff.

Any executive who chooses to undertake a program of cost-management, then, is probably going to find themselves out on a limb and needing to show true leadership skills. And he or she is going to have to do it in today's business world, when the buyer is often at a disadvantage.

The seller, or supplier, possesses vital market knowledge that the buyer, or company, does not have because of a lack of resources, time, expertise - or a combination of all three. Consequently most, if not all, organisations overspend significantly on their business operating costs.

Experts estimate that 90 per cent of Australian businesses are overspending on day-to-day expenses, by as much as 75 per cent!

How does a company know if it's one of the 90 per cent? Our ERA website (www.expense-reduction.com.au) suggests that if a company can answer 'yes' to any of the following there is a good chance a company can reduce its business operating costs and free up profits:

YES/NO There is no centralised purchasing system. Each department seems to have its favourite suppliers and its own purchasing processes.

YES/NO We always seem to be purchasing in an ad-hoc, as-needs, manner, instead of benefiting from bulk purchases.

YES/NO We seem to stick to the same supplier and trust that they're giving us value for money.

MAJOR AREAS OF COST CONTROL

The main areas where costs can be rationalised include telecommunications, business travel, energy, freight, couriers, mail, office supplies, reprographics and stationery as well as cleaning, merchant card services, maintenance contracts and document storage, but of course the list is endless.

Though when reviewing ov

Wouldn't that represent real savings - and an increase on the bottom line?

The truth is that a significant cause of poor business performance in Australian companies is the lack of attention given to the cost of running the business.

The reasons for this lack of attention are many, but here I am going to focus on three of them. The process of cost management and review can be difficult to manage. Tough-minded resolve is usually required, and cost-reduction initiatives are not always positively received by colleagues and staff.

Any executive who chooses to undertake a program of cost-management, then, is probably going to find themselves out on a limb and needing to show true leadership skills. And he or she is going to have to do it in today's business world, when the buyer is often at a disadvantage.

The seller, or supplier, possesses vital market knowledge that the buyer, or company, does not have because of a lack of resources, time, expertise - or a combination of all three. Consequently most, if not all, organisations overspend significantly on their business operating costs.

Experts estimate that 90 per cent of Australian businesses are overspending on day-to-day expenses, by as much as 75 per cent!

How does a company know if it's one of the 90 per cent? Our ERA website (www.expense-reduction.com.au) suggests that if a company can answer 'yes' to any of the following there is a good chance a company can reduce its business operating costs and free up profits:

YES/NO There is no centralised purchasing system. Each department seems to have its favourite suppliers and its own purchasing processes.

YES/NO We always seem to be purchasing in an ad-hoc, as-needs, manner, instead of benefiting from bulk purchases.

YES/NO We seem to stick to the same supplier and trust that they're giving us value for money.

MAJOR AREAS OF COST CONTROL

The main areas where costs can be rationalised include telecommunications, business travel, energy, freight, couriers, mail, office supplies, reprographics and stationery as well as cleaning, merchant card services, maintenance contracts and document storage, but of course the list is endless.

Though when reviewing ov

The seller, or supplier, possesses vital market knowledge that the buyer, or company, does not have because of a lack of resources, time, expertise - or a combination of all three. Consequently most, if not all, organisations overspend significantly on their business operating costs.

Experts estimate that 90 per cent of Australian businesses are overspending on day-to-day expenses, by as much as 75 per cent!

How does a company know if it's one of the 90 per cent? Our ERA website (www.expense-reduction.com.au) suggests that if a company can answer 'yes' to any of the following there is a good chance a company can reduce its business operating costs and free up profits:

YES/NO There is no centralised purchasing system. Each department seems to have its favourite suppliers and its own purchasing processes.

YES/NO We always seem to be purchasing in an ad-hoc, as-needs, manner, instead of benefiting from bulk purchases.

YES/NO We seem to stick to the same supplier and trust that they're giving us value for money.

MAJOR AREAS OF COST CONTROL

The main areas where costs can be rationalised include telecommunications, business travel, energy, freight, couriers, mail, office supplies, reprographics and stationery as well as cleaning, merchant card services, maintenance contracts and document storage, but of course the list is endless.

Though when reviewing ov

Experts estimate that 90 per cent of Australian businesses are overspending on day-to-day expenses, by as much as 75 per cent!

How does a company know if it's one of the 90 per cent? Our ERA website (www.expense-reduction.com.au) suggests that if a company can answer 'yes' to any of the following there is a good chance a company can reduce its business operating costs and free up profits:

YES/NO There is no centralised purchasing system. Each department seems to have its favourite suppliers and its own purchasing processes.

YES/NO We always seem to be purchasing in an ad-hoc, as-needs, manner, instead of benefiting from bulk purchases.

YES/NO We seem to stick to the same supplier and trust that they're giving us value for money.

MAJOR AREAS OF COST CONTROL

The main areas where costs can be rationalised include telecommunications, business travel, energy, freight, couriers, mail, office supplies, reprographics and stationery as well as cleaning, merchant card services, maintenance contracts and document storage, but of course the list is endless.

Though when reviewing ov

YES/NO We seem to stick to the same supplier and trust that they're giving us value for money.

MAJOR AREAS OF COST CONTROL

The main areas where costs can be rationalised include telecommunications, business travel, energy, freight, couriers, mail, office supplies, reprographics and stationery as well as cleaning, merchant card services, maintenance contracts and document storage, but of course the list is endless.

Though when reviewing overhead costs and establishing benchmarks, there are a number of other factors that need to be taken into consideration to achieve long term success in maintaining cost savings. These include improved inventory management and cost-analysis and management tools, better compliance with corporate contracts and the fact that staff remains focussed on strategic tasks. Plus the consideration that new suppliers or options provide exposure to, and the introduction of, new ideas, technologies and trends, to help enhance competitive advantages.

So how does a company implement a plan of effective cost-management? I would suggest the following:

Care about effective cost-management.

If a company's staff is complacent about financial performance and cost control, there is little chance that a cost-saving project will succeed. Executives must find the time to take an interest in reviewing expenses and reducing costs - staff generally mould their behaviour to match that of their leadership.

Cost-cutting should not be allowed to become the 'flavour of the month'

Remain motivated to keep costs in check on a regular basis. If a cost-management 'culture' is not established, employees will quickly allow your 'push' to fade away. It's important to instigate measurable strategies for cost reduction.

Over-confidence can be a killer

Companies that assume their costs are under control based on historical trends, or assume that their market knowledge is watertight run the risk of overspending through arrogance. You know what you're paying, but do you know what your competitors pay for the same products? Never assume that you know the market as well as your suppliers - and never assume that they're doing you the best deal possible.

Compare your cost-management performance to others in your industry and region. "Gather the data from outside agencies, consultants or benchmarking services," says Marfleet. "Be careful that you understand the data as it applies to your situation - data is useless unless it is interpreted correctly."

Understand what you're buying

Determine your product and service requirements. Don't purchase premium services unless absolutely necessary. Sales people will often use bait-