TOUGH Cuts

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					 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
				
DOCUMENT INFO
Description: 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."
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