Cut Costs Not Corners

by Barrow, Colin

• ISBN13: 9780749459765
• ISBN10: 074945976X
• Format: Paperback
• Copyright: 2010-06-28
• Publisher: Kogan Page Ltd

Summary

Cost cutting is an issue for managers and executives at every level in all companies, whether large or small, public or private sector.

Author Biography

Colin Barrow, MBA, was until recently Head of the Enterprise Group at Cranfield School of Management, UK, where he taught entreprenrship on the MBA and other programmes. Before joining Cranfield he held senior staff and line positions and has had first-hand experience of introducing successful cost-reduction programmes in good times and bad. He is also a visiting professor at business schools in the United States, Asia, France, Ireland and Austria. His previous books include The Thirty-Day MBA, The Business Plan Workbook, Financial Management for the Small Business, The Successful Entrepreneur's Guidebook and, as part of the new Business Enterprises series, Starting a Business From Home (all published by Kogan Page).

Table of Contents

Introduction	p. 1
Whose cost is it anyway?	p. 9
The nature of cost	p. 9
The components of cost	p. 11
Fixed costs	p. 11
Variable costs	p. 12
Semi-variable costs	p. 12
The dynamic behaviour of costs	p. 13
The costs to be cut	p. 14
Using the ROI framework for reviewing costs	p. 16
Three more facts about costs	p. 17
Cost leadership is a desirable strategic goal in itself	p. 18
Cost leadership is not the same as low price (or even low quality)	p. 18
Low costs are not a lucky accident	p. 19
The experience (or learning) curve	p. 21
Pareto's 80/20 rule	p. 22
Cost-cutting assignment 1	p. 24
Kill Bill I: reduce capital expenditure	p. 26
Cut cash costs, not depreciation costs	p. 26
Depreciation distorts spending plans	p. 28
Sizing up space needs	p. 29
Work out what space you need and where you need it	p. 30
Rent out spare space (and other services)	p. 31
Hot desking and teleworking	p. 32
Running the business from home	p. 34
Equipment efficiencies	p. 35
Production methods	p. 35
Getting equipped for less	p. 37
Comparing prices	p. 38
Bartering online	p. 39
Hi-tech for less	p. 39
Outsourcing	p. 43
Sunk costs	p. 45
That sinking feeling	p. 46
The make-or-buy decision	p. 47
Taking the long view	p. 47
Tracking capital costs	p. 48
Cost-cutting assignment 2	p. 50
Kill Bill II: make working capital work	p. 52
The working-capital cycle	p. 54
Keeping stock costs down	p. 56
Economic order quantity	p. 56
Getting paid and paid faster	p. 58
Chasing debtors	p. 59
Credit cards	p. 60
Resorting to law	p. 61
Taking credit	p. 62
Negotiate supplier discounts	p. 62
Ask for stock on consignment	p. 63
Cash and overdrafts	p. 65
Keeping on top of working-capital costs	p. 65
Current ratio	p. 66
Quick ratio (acid test)	p. 66
Average collection period	p. 67
Average payment period	p. 67
Days' stock held	p. 67
Circulation of working capital	p. 68
Cost-cutting assignment 3	p. 68
Max up margins	p. 69
Introduce profit (ie less cost) motivation	p. 72
Link rewards to margins	p. 73
The dangers of rewarding sales	p. 73
Avoiding the overtime trap	p. 74
Motivate without money	p. 75
Review your products and services	p. 76
Costing to eliminate unprofitable products and services	p. 77
Strip out unnecessary product cost	p. 78
Don't rush into discounts	p. 79
Sell to the right market segment	p. 80
Materials and their usage	p. 82
Review suppliers	p. 82
Use fewer suppliers, ones who need your business	p. 83
Find lower-cost substitute materials	p. 84
Buy in bulk or online	p. 85
Negotiate better prices	p. 86
Strip out waste	p. 88
Eliminate theft and fraud	p. 89
Cost-cutting assignment 4	p. 90
Trim overheads	p. 91
Saving on sales and marketing	p. 92
Advertising on a shoestring: how to get seen more for less	p. 93
Measuring results	p. 94
Choosing the media	p. 94
The internet: the CCCO's best ally	p. 95
Public relations: advertising for free	p. 96
Selling more for less	p. 97
Internet: the universal cost cutter	p. 99
Low-cost selling online	p. 100
Other internet cost reducers	p. 101
Saving on website design	p. 102
Thrifty visibility	p. 104
The best of the rest: motoring and travel expenses	p. 107
Vehicle costs	p. 107
Travel on a budget	p. 108
Utilities and telecommunications	p. 109
Wages and salaries	p. 110
Go paperless	p. 113
Cost-cutting assignment 5	p. 114
Minimize finance and tax costs	p. 115
Interest and finance costs	p. 116
Free money	p. 116
Gaining grants	p. 116
Winning competitions	p. 117
Cashless cash: using a local exchange trading scheme	p. 118
Borrow from family and friends	p. 118
Get better terms from banks	p. 120
Negotiating with bankers	p. 121
Finding a business banker	p. 122
Putting spare cash to work	p. 122
Reduce the tax take	p. 123
Keeping more profit	p. 123
Value-added tax and sales tax	p. 124
Walking the thin red line	p. 125
Accountancy and audit	p. 126
Cost-cutting assignment 6	p. 127
Cutting costs in a crisis	p. 128
Slashing the wages bill	p. 129
Cull headcount	p. 129
Freeze hiring	p. 130
Lower the wage bill	p. 131
Unfair dismissal	p. 133
Make asset savings	p. 133
Reduce financing and tax costs	p. 135
Cut and run	p. 138
Falling foul of the authorities	p. 141
Cost-cutting assignment 7	p. 142
Staying lean and mean	p. 143
Budget for cuts	p. 143
Forecasting	p. 144
Cost-budget principles	p. 145
Demonstrated best practice (benchmarking)	p. 146
Variance analysis	p. 147
Flexing the budget	p. 148
Seasonality and trends	p. 149
Zero-base budgets	p. 150
Set cost-cutting priorities	p. 150
Making cost cuts happen	p. 152
Managing the cost-cutting process	p. 152
Cost-cutting assignment 8	p. 160
Index	p. 161
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