Q: What company expenses can we save on that will have a large impact on our cash flow and profits, but will have little impact on our products or services?
A: There are two types of operating expenses that you have to consider: variable expense and fixed expense.
Variable expenses are those that change depending on your sales level. Normally, this pertains to the cost of your product. If you sell a large quantity, your cost of sales rises and vice versa. Because the expense varies with the level of your production, a little savings in cost per unit may mean huge savings especially if your sales volume is high.
You may want to review your costing and check your margins. Are you paying the least possible amount to your suppliers without sacrificing quality? Are there available substitutes that can help you lower your costs? How is your inventory damage and wastages?
These are some of the things you need to check in order to improve your margins. Any improvement of 1 to 2 percent in margins may mean substantial improvements on your bottomline.