Financial analysis: evaluate costs and reduce expenses intelligently
Posted: Mon Jan 20, 2025 10:23 am
Reduce costs, increase sales and improve operational efficiency. This is perhaps one of the phrases most heard by managers within organizations, especially when the scenario is one of economic and financial crisis.
And that's where we want to get to. One of the biggest budget planning mistakes is thinking about cutting costs only when business isn't doing well.
It is not difficult to understand the logic behind this. To carry out a consistent financial analysis, you need to have time and money to “finance the cuts”.
For example, if the internal structure is bloated, it is necessary uganda whatsapp data to plan who will be fired, redesign the process without that person and define how the company will function in the new scenario, so as not to compromise the result or the functioning of the processes.
Or, when the cost of rent is too high, you should carefully analyze the best financial strategy to follow. Will changing address at this time really bring the expected savings? Right away, you will have to plan to pay the termination fee of the contract, invest in renovating the new location, hiring an architect, buying furniture, etc.
If you act under pressure, you may have other financial problems in the future. Therefore, the best time to reduce expenses is when your cash flow is positive. At this time, you have time to act in a planned manner and thus reduce the margin for error.
Identify expenses that add (or not) value to the business
The first step to carrying out an assertive financial analysis is to detail all of the company's costs and/or expenses. And this means identifying which items add value to the customer.
Let's analyze the performance of a car manufacturer. Its cost is certainly higher to produce a car with air conditioning. However, if the company cuts this cost and starts selling vehicle models without this equipment, sales will probably fall. Customers prefer to buy a car with air conditioning because it adds value to the business.
However, if a furniture manufacturer decides to replace chair legs made of material X with Y, which are cheaper, the “customer” probably won’t even notice the difference, as this cost doesn’t add any value to them.
Therefore, when planning your budget , identify the operating costs that do or do not add value in the eyes of the customer. Don't be tempted to transfer your personal values to the business. What is important to you will not always reflect the needs of the company's target audience.
Eliminate processes that no longer bring results (and are expensive!)
Who has never been in the situation of seeing an employee who spends hours and hours every month closing and creating the same spreadsheets? Often, when taking the time to understand what he is doing, the manager realizes that these spreadsheets that take up a huge amount of time in his day-to-day work are no longer useful in the model that is being created.
As many internal processes are already automated, it is more worthwhile to include the analysis of some data in the business management system and free up the professional to perform more strategic functions within the company.
Therefore, it is very important to understand how each area works and map the processes that no longer bring results, but are expensive.
And that's where we want to get to. One of the biggest budget planning mistakes is thinking about cutting costs only when business isn't doing well.
It is not difficult to understand the logic behind this. To carry out a consistent financial analysis, you need to have time and money to “finance the cuts”.
For example, if the internal structure is bloated, it is necessary uganda whatsapp data to plan who will be fired, redesign the process without that person and define how the company will function in the new scenario, so as not to compromise the result or the functioning of the processes.
Or, when the cost of rent is too high, you should carefully analyze the best financial strategy to follow. Will changing address at this time really bring the expected savings? Right away, you will have to plan to pay the termination fee of the contract, invest in renovating the new location, hiring an architect, buying furniture, etc.
If you act under pressure, you may have other financial problems in the future. Therefore, the best time to reduce expenses is when your cash flow is positive. At this time, you have time to act in a planned manner and thus reduce the margin for error.
Identify expenses that add (or not) value to the business
The first step to carrying out an assertive financial analysis is to detail all of the company's costs and/or expenses. And this means identifying which items add value to the customer.
Let's analyze the performance of a car manufacturer. Its cost is certainly higher to produce a car with air conditioning. However, if the company cuts this cost and starts selling vehicle models without this equipment, sales will probably fall. Customers prefer to buy a car with air conditioning because it adds value to the business.
However, if a furniture manufacturer decides to replace chair legs made of material X with Y, which are cheaper, the “customer” probably won’t even notice the difference, as this cost doesn’t add any value to them.
Therefore, when planning your budget , identify the operating costs that do or do not add value in the eyes of the customer. Don't be tempted to transfer your personal values to the business. What is important to you will not always reflect the needs of the company's target audience.
Eliminate processes that no longer bring results (and are expensive!)
Who has never been in the situation of seeing an employee who spends hours and hours every month closing and creating the same spreadsheets? Often, when taking the time to understand what he is doing, the manager realizes that these spreadsheets that take up a huge amount of time in his day-to-day work are no longer useful in the model that is being created.
As many internal processes are already automated, it is more worthwhile to include the analysis of some data in the business management system and free up the professional to perform more strategic functions within the company.
Therefore, it is very important to understand how each area works and map the processes that no longer bring results, but are expensive.