While it's true that your people are your biggest asset, it's also true that labor makes up the lion's share of your costs - and that includes indirect administrative and management salaries. "It is important that you evaluate your staff just as you would your material resources," [Jon Ewing] reminds. "You must analyze every labor dollar to determine that each provides value to your customer."
12 PRO • Volume 21 Number 6 • Summer 2009 FINANCIAL MANAGEMENT By Jon Ewing If you’re facing pressures from decreased sales, now is the time to take a pragmatic approach to cost cutting. Start with direct costs crew,” Ewing points out. “Over While a handful of over- the course of several months, head expenditures are typi- that adds up to some serious cally first to get thrown on money.” the chopping block, Ewing Materials are another says it’s important to recognize large expense. Ewing is a big that significant savings may fan of having loyal vendors. also be realized by reducing “You create loyalty by treat- your direct costs. “These are ing suppliers fairly,” he says. costs that are directly applied “Nonetheless, you may be able to each job,” Ewing reminds. to improve your purchasing by “They are costs that can be developing materials lists and assigned specifically to a offering them to three or four project with a high degree of of your most trusted vendors.” accuracy.” Direct costs would include “You may be able the following items on your income statement: to improve your • Direct labor purchasing by • Materials • Payroll taxes developing • Labor benefits materials lists and Labor is generally your single largest expense. Make sure that offering them to everyone on your crews is pro- three or four of ductive. For example, analyze your costs to spread fertilizer, your most trusted mow lawns and weed groun
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