As a business owner, complete control over your domain is crucial. As we all know this typically leads to wearing many hats, and one is constantly being pulled in many different directions. Typically, you can choose not tot follow a process or have a systematic approach to running your business. This would lead you to ignore the strict schedule on the day to day. This way, you will find that things slip thru the cracks. To be sure, administrative costs is one of those things.

It goes without saying, businesses have many different costs and inherent bills to be paid. Administrative costs have been proven to be a large expense. There are fixed wages, such as employee salary and expenses. There is the cost of keep the lights on, rent, research and development, travel and entertainment expenses. The list can actually go on and on for quite some time. Administrative costs are part of the area of opportunity. Let’s dive deeper into this subject matter.

What Are Administrative Costs?

The issue that many business owners confront with is one of prioritization. Lets face it: administrative costs are relatively low on the totem pole when it comes to priority and time spent. Most business owners, rightfully so, spend their time on generating revenue and sales. More dollars in the door will help offset expenses, and sales cures all. That is true, and should not be toyed with.

Top line revenue does cure all, and in a rip roaring economy, as we are in now, presses down on the gas pedal. Send your salesman out and call on clients and prospects, and bring in those dollars. But, we would be remiss if we did not carefully go over our cost structure with a fine-tooth comb.

The problem with administrative costs is that they are small in nature, but can quickly add up. An example is: copying fees, courier fees, the weekly order for coffee and snacks that you simply sign for and ignore.

Who Needs Administrative Costs Savings the Most?

This varies from firm to firm. The first thing to do, in order for you to find out, is sit down with your finance colleagues. In a larger company, you will have dedicated staff that does this on the day to day. For a smaller firm, it might just be one person, maybe a controller, or a dedicated bookkeeper.

There is usually one person that has responsibility over the day to day operations of accounting for where money is spent. Remember – you, as the business owner or CEO are tasked with leading. Leading in the sense that you have trusted employees that work in the business on the day to day. Take their advice, consider it and make decisions.

How Much Is Spent on Administrative Costs?

Once you have met with your team and have a handle on dollars going out the door, and where it is being spent, you are halfway there. As we know, you need to identify first what you are writing check on, and for, before you can begin to slice and cut back. The administrative costs require both a total amount and a detailed report on each dollar. This way, you can also generate and expenses percentage for your company.

This analysis required often updates and also includes relations with collaborators. Some businesses put all of their contracts out to bid every quarter, or even every month. It encourages competition in the marketplace and best practices. You will be surprised as far as how many vendors will come back with lower prices points, without negotiation having taken place. This is your starting point.

5 Steps to Reduce Administrative Costs

In order to save money and drive the business forward, you need to cut administrative costs that add up week after week and month after month. Ruthlessly go thru your budget, line item by line item, and commit to cutting at least ten percent. The administrative costs that usually become a burden are on things prone to inflation and over-consumption. You can revise these anytime. If you find you cannot go without in a specific area, simply bring it back, and look for savings elsewhere.

1. Know the Numbers

Arrange a meeting with the finance department, and ask for a complete report. Let them speak, and provide the report. Then, ask for their objective, qualitative advice. Where do they see opportunity? What is being missed? Why have they not spoken up in the past?

2. Ask for a SWOT Analysis

Where does your controller or accountant see areas of opportunities. This analysis focuses on Strength, Weaknesses, Opportunities, and Threats. Have this conversation, and use it as a takeaway.

3. See the Details: Parking Fees, Paper Fees for the Printer

You can ask yourself if you are buying the shiny paper or the standard off-white, low pulp kind. You don’t know? That is a problem. Keeping an eye on administrative expenses means being able to know where to cut-off from, if necessary.

4. Update the Prices of Your Collaborators

Call all of your vendors, personally, from the owner and CEO level, and ask them to rebid on their contracts. Ask your vendor to come back with a best and final quote as far as improving their price. This is not “mean” or “unfair” rather, it is good business.

negotiation at desk

5. Negotiate

Let the vendor now that you are applying efficiency to your business and looking at everything. Make them come down, if not meet you in the middle. Remember, you are simply looking to improve cost efficiency, and everything is on the table. You will see with surprise how much you can cut with this method.

The bottom line

Getting a handle on the administrative costs will add upside to your finances. As we know, cost efficiency may drop to the bottom line, and over the course of a four quarter fiscal year. Then, you should see meaningful uptick in the overall financial picture. You can plan on seek out a business coach, or a specialist that works in streamlining costs on the day to day. Then, you might not even need to worry on implementation.

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