Expense Management Strategies – Part Two


Monthly and Recurring Expenses


Last time, we talked about the road less traveled of routes to profitability:  employing expense management strategies.  We explored several strategies, such as rental spaces, website hosting, and purchasing policy.  Today, we are going to look at more ways to strategize your monthly and recurring expenses, starting with shop and business management:


Expense Management Strategies


Shop and Business Equipment:

Our industry has a relatively high business failure rate, which provides the remaining shop owners with the opportunity to purchase useful used shop and business equipment for pennies on the dollar.  Watch industry publications and websites for these opportunities.


Salaries and wages represent a large chunk of the cost of sales or operating expenses.  Evaluate all positions for performance results vs. expectations or benchmarks.  If any of the staff is not achieving the benchmarks, find out why and make the changes or investments necessary to get performance in line with expenditures.

Reduce excess staff or limit the current staff’s hours and/or days worked in an effort to cut expenses.  Many shops use part-time employees for maintenance, clerical, and customer service positions.  Part-time employees usually do not receive benefits, which serves to keep staff expenses low.  Whenever possible, cross-train employees and redistribute positions that become vacant.  Also, try to reduce or eliminate overtime expenses, unless they provide a direct return on investment.

Health Care Benefits:

Health care costs have been escalating at an alarming rate.  This has led to many small businesses implementing cost-sharing by employees, which means the employee pays a portion of the cost of the employee’s health care premiums.  To help employees manage their portion of the costs, many shop owners have set up a Flexible Spending Account, which enables their employees to pay a portion of their health insurance costs with pretax dollars.  Another method of controlling health care costs is by increasing deductible and prescription copayments.

Banks and Credit Cards:

All bank statements should be reviewed for unusual or miscellaneous charges.  Again, banks do negotiate.  If you seek a sizable loan, apply to at least two sources of funding.  Ask the bank with the higher rate to beat any lower rate that may be offered.

When utilizing credit cards, you may want to compare business and corporate credit card rates and services side-by-side.  Revisit your credit card fees and continually shop around.  If you locate lower fees, present them to your credit card issuer and ask them to match the lower fees.

Business Insurance:

The wrong way to save money on business insurance is to go without it.  The right way is to get the coverage you need at the best price.  Put your insurance up for a bid.  Ask other business owners for referrals of insurance agents.  Allow your current agent to participate in the bid process.  You may be surprised at the new prices!

Review all insurance deductibles, including health, casualty, and the exclusion period on disability insurance.  Ask your insurance agent for a review of your facility and equipment.  Ask if all your currently owned assets, and only your currently owned assets, are covered.  Make sure you’re not over or under-insured on your business assets, business interruption, and other types of coverage.

Also, request a safety inspection program.  Implementing the insurance company’s ideas could reduce insurance premiums, decrease job-site injuries, and reduce medical leave.

Invoices, Statements, & Contracts:

Review all supplier invoices, statements, and contracts for errors or miscellaneous fees and charges.  Some vendors are now implementing fuel surcharges or “recovery” charges on their invoices.  If you’re under contract with some of these suppliers, read your contract.  If a contract does not include a fuel surcharge or recovery charge, you may be able to legally refuse to pay that vendor.  Sometimes you may be able to negotiate these surcharges away.  In some instances, by paying these charges, even though they may not be spelled out in the agreements, you may be setting a precedent that you agree to them.

Our observations are that the more obvious offenders are trash companies, laundry companies, and other outfits that deliver or pick up from your premises.  Also, review your contracts for automatic price escalation based on percentages.  It pays to audit your invoices, statements, and contracts.  This type of review applies to utility and phone bills as well. 


Turn down the thermostat, use energy-efficient lighting, and turn off the lights when you leave a room.  Ask your local utility companies about budget billing and review the many other energy-saving and money-saving tips you can find online.

Postage and Shipping Fees:

Using a postage scale will reduce postage and shipping costs, but you’ll need to make sure current rates are programmed in.  When contemplating shipping, always ask yourself if it really has to be there the next day by 10am.  Perhaps an afternoon delivery or second day delivery would do just as well.  Inform employees to place orders for necessary supplies in advance so that you don’t have to rely on express shipping.


This is where we’re stopping today, so make sure to check back in two weeks for more cost-saving areas in the final posting of our expense management strategies.  Are there any areas your business could improve in?  If you have questions on cost-saving measures or want more information on business management training, call our office at 425-988-6812.


Written by RLO Training