Accounting outsourcing | Minimizing Expenses
An industry Canada statistic says that 50% of all businesses will fail within the first five years says accounting outsourcing, and 42% of those businesses will say that the reason they failed was because they were unable to attract enough customers. One of the problems that feeling business owners have is they become fixated with minimizing expenses in their business, even though minimizing expenses will not help them succeed, they need to attract more customers. As Peter Drucker, the author of 39 business books wrote ìnothing happens until someone sells somethingî. Business owners need to understand, that the key to business success is increasing revenue, not cost-cutting.
As attractive as cost-cutting sound, that is an employee mindset says accounting sourcing, that is to say that most employees canít change their salary, so they must cut their costs in order to increase wealth. However business owners are in a unique position to be able to increase their revenue infinitely. They need to spend their time in their business on revenue increasing activities, rather than slashing expenses.
Because business owners, like all people have limited amount of time – 168 hours every week to be exact, they need to use their time very effectively in their business. By spending as little time as necessary on activities that will affect their bottom line, they need to spend most of their activities on activities that will increase their business such as advertising and marketing and increasing productivity in their business says accounting sourcing.
Accounting outsourcing recommends that if business owners have extra cash, and can spend money to save time, that is something that they should do. Especially if itís something that somebody else can do more efficiently than them, as long as their trading money for more time at a lower rate, they should do that. An example of that if a business owner is able to work on a project, but take them long time, they can pay a professional money to do it in half the time. Thatís a good use of money, so that they can free up time the have been spending on that act on an activity that can increase revenue in their business.
That is not to say that business owners shouldnít spend any time on minimizing expenses, but they just need to know what expenses will make the biggest impact to their bottom line with the least amount of effort says accounting sourcing. By reorganizing their income statements beat numerically descending in order, business owners can very easily see the top half of the list that will make the biggest impact when they spend time on it says accounting outsourcing. At the very top of the list will be gross margin and administrative labour. By figuring out how to optimize those two line items, business owners can make the biggest impact on their bottom line in the smallest amount of time, freeing up their freeing up their time to spend on increasing the revenue in their business.
With 50% of all businesses who fail within the first five years says accounting outsourcing, 42% of those businesses say that unable to attract more customers is the reason for the failure, business owners need to understand that biggest impact of their business will be spending as much of their time as possible on advertising and marketing as well as increasing the productivity to get a better margin in their business is how they should be spending their time.
One thing that business owners should do within their business in order to easily see where their spending most money in their business, to organize their income statements in numerically descending order. That way, says accounting sourcing business owners can easily say exactly where to spend their time to minimize expenses. Usually the top items that income statement would be rent, gross margin and administrative labour.
Accounting outsourcing says other than rent, administrative labour will be the highest overhead expense that they will face in business. Business owners can reduce hours, or task administrative staff to billable hours on activities such as sales and marketing, advertising, or Accounts Receivable. The next most expensive cost of the rent on the income statement will be gross margin. By spending their time taking up their gross margin, both give this owners a good way to return on their time. If they can advise the direct cost of labour including subcontractors, supplies and materials, business owners can be assured that while time they spend on this, will make it impact in their business. Something that business owners can avoid spending time on things that will end up on the lower half of that list such as utilities, phone bills, office supplies big charges. These smaller things will help success will businesses be successful, but they will not help feeling business succeed.
Once business owners have seen where they can make a large impact their bottom line and a minimal amount of time, the next thing that business owners need to do is spend their time on revenue increasing and generating activities such as advertising and marketing and evaluating those advertising and marketing initiatives. And by increasing productivity in their business such as creating checklists and templates of the business to help them and their staff increase productivity and minimize mistakes. Once business owners are in the mindset that they donít have to minimize cost as a way of increasing business, and they have an unlimited potential to create unlimited income for themselves, then they will start spending time activities that will help them be successful says accounting outsourcing. If the business owner has some additional cash can spend money to save time then they should be sure that the do so but only if they can trade money for time at a lower rate than they can. This is owners need to know that even though there time and money is limited, they can always make more money and they can never make more time.