The end of the year tallying and budgeting has already come to a close. The verdict is in and your company needs to cut costs, but how? It can be difficult to figure out what and how much to cut; You don’t want to cut people and major projects without being sure they aren’t absolutely vital to the health and future growth of your company. So where do we begin?
First ask yourself these questions: Which of your past projects were successful? How many employees worked on them? How much time and resources were spent on them? Do you know which of your clients are profitable and which ones you lose money on? This information is crucial for planning future projects and budgets. If you don’t know the cost of past projects on a per-project, per-customer basis, then you have no way to execute logically thought-through future investments.
Track Employee Time
Here’s where we begin. The very first thing you need to do is track your employees’ time on a per-project basis. With time sheets now being considered Web 1.0 material, make sure to emphasize the importance of tracking their time via web-based and mobile tools; account for your employees time-well-spent via a project-by-project basis. This data will alert you in real-time when projects are in trouble so that you can manage the situation before it becomes a crisis.
Add Labor Rates and Expenses
Adding labor rates to the data is a must-have. It’s in this way that you can determine which employees’ time costs the company too much money and how their time can be better spent. Factor in all expenses, such as those in the travel and trade show budget, to get a more robust view of the cost of each project. Next you need to factor in indirect expenses. General company-wide overhead costs such as rent should be applied equally across all projects. Customer-specific expenses should be applied to just those departments that deal directly with customers, so as to not fault the other departments that don’t operate directly with your customer base.
Be aware. Having asked all of the aforementioned questions, you now know and understand the profitability of each of your projects and customers. You can easily isolate the unprofitable work and make cuts where needed without threatening the longevity of your business. Knowing where you are profitable and where you’re equally not thriving will allow you to flourish in 2014 and beyond.