Due to the deterioration of the financial and economic situation at enterprises, which has worsened due to the manifestation of the negative trends of the global financial crisis, which has already become an economic crisis, many companies are beginning to panicky reduce their costs. Company management sees cost reduction as one of the main recipes for survival during a crisis. Therefore, in the pursuit of savings, even entire cost items began to be “cut off” indiscriminately. Decisions, of course, need to be made very quickly, almost instantly, in such situations. And decisions regarding costs and expenses are some of the easiest decisions that management will have to make, since they relate to what the enterprise actually owns, cash, as opposed to making, for example, strategic, marketing, innovation decisions, making which, due to increasing uncertainty, have become even more complex. Therefore, it is clear that the easiest way is to “tighten the belts” and “tighten the nuts.” However, thoughtless reduction of expenses and “tightening of belts” can lead to negative strategic consequences and tactical losses. When making hasty decisions to reduce costs, categories of “good” or highly productive expenses that bring a huge multiplier economic effect to the company are also often overlooked. Therefore, the application of folk wisdom is correct here: “Measure seven times and cut once”!

This article does not pretend to be a review of all solutions for optimizing costs and expenses of all types, but only aims to draw the attention of company management to the fact that expenses need to be treated carefully, wisely, and not “indiscriminately”, crossing out entire items.

We need to fight to reduce not all, but only unproductive, ineffective, irrational costs. You need to ask yourself the following questions:

• How can you intensify, increase the impact and efficiency of costs that the enterprise is going to reduce.
• How will a reduction in one or another cost item affect the company in one, two, three, five and ten years?
• What risks are associated with certain expenses, and how will reducing expenses affect the likelihood of these risks occurring?
• Does the volume of a certain cost item have “critical weight”, what are the tasks and functions assigned to these costs?
• What alternative solutions are available? How can you compensate for cost reduction?

Reducing the cost of training at seminars, courses, trainings, attending conferences and forums

Attendance by employees and managers of training programs (seminars, trainings, courses, internships), business and professional events (conferences, forums, round tables, symposia), with proper organization of the work of an organization representative, gives the company a huge direct and indirect effect, many times covering the costs incurred.

• New technological, business, industry, and professional knowledge that is important for the development of the enterprise is acquired.
• There is an exchange of information and experience with colleagues from other enterprises and industries.
• The participant receives a strong energy boost, allowing him to significantly increase his productivity, efficiency and initiative.

• Try to reduce the cost of participation in the event. If you contact the organizers of a course or conference correctly, in 9 out of 10 cases the company will be given a significant discount or given the opportunity to attend the event for two employees when registering only one participant.
• Take an active and proactive position during the event, trying to extract maximum benefit for the company from attending a seminar or forum.
• Take a voice recorder with you to the event to be able to listen to the most valuable moments again, and then share useful information with other employees.
• Based on the results of attending each event, each employee is required to present all applied points discussed at the conference or seminar in the form of clear proposals for implementation at the enterprise. At the same time, the employee should not limit himself only to the work of his department.

These are just examples of some recommendations for increasing the effectiveness of visiting business and professional forums. And one cannot but agree that training programs and business events are an effective source of ideas, knowledge, experience, connections, and innovative aspirations that are so necessary to overcome crisis situations.

Reducing communication and Internet costs

Many large industrial enterprises are reducing limits on long-distance and international telephone calls. On the one hand, this may be correct in relation to cost overruns in departments whose competencies do not include external communications. But with regard to telephone conversation limits for marketing, sales, and supply departments, the effectiveness of which largely depends on the intensity of international communications, the situation should be exactly the opposite. But in this case, in order to increase efficiency and return on these costs, the enterprise must develop a standard or regulation for international telephone conversations, providing employees with clear and practical tools for effective work.

Reducing Internet costs by reducing Internet connection bandwidth is also not entirely reasonable. When rebuilding infrastructure destroyed by natural disasters in New Orleans and other affected regions of the United States, authorities first restored high-speed wireless Internet. And the Internet is free there. This promotes growth and development of the economy. The most progressive countries have long understood that the Internet is as necessary an infrastructure as roads or television and radio broadcasting and as effective a catalyst for development as business incubators or high-tech parks. In our country, unfortunately, the cost of Internet services is one of the most expensive in the world, despite the technological simplicity of providing these services. By the way, the World Wide Web is today an indispensable source of information resources, a provider of interactive services that allow solving many business issues and developing business processes, which is especially important during a crisis.

• This is a source of commercial, marketing, technical information, contact and management information.
• This is an effective means of communication (e-mail, ICQ, Skype, forums, blogs, networks, chats, etc.), serving as an effective alternative to all traditional means of communication.
• This is a strong promotion channel (sending out commercial and business proposals, negotiations on the Internet, posting information about the company on numerous Internet media, promoting the company’s website).

Another point is again increasing the efficiency of using Internet traffic for the development of the enterprise. Here we can absolutely safely say the following: our domestic manufacturing enterprises practically do not use the numerous opportunities provided by the global information space today. We are not even talking about the intensity of use; our companies still need to master the Internet in extensive ways for a long time, to try at least half of those Internet tools, carriers of unlimited possibilities that are provided to us today. Once again, the learning factor is on the agenda. Companies and employees are often simply not aware of the unlimited possibilities of working on the Internet, not to mention the fact that enterprises do not have systems, for example, Internet marketing.

The same applies to the costs of developing and creating a company website. Nowadays, a company simply cannot manage without a website. Today there is an axiom: “No on the Internet - no in business”! But it is possible to develop a web resource that is equally effective for both 5000-7000 and 500-700 conventional units. Hosting is an order of magnitude cheaper if you order it abroad and pay with an international card or electronic money. So an extra ruble is freed up for you to invest in development and promotion. And this order of numbers is present in the economy at every step today; the only task is to be aware and look for new solutions!

Reducing costs for long-distance and foreign business trips

Any commercial director will confirm that you can write many letters for a long time, corresponding with potential partners, spend hours on telephone conversations, and in just a few minutes resolve the issue face to face in a personal meeting. Negotiations during business trips are one of the most effective tools for promoting an enterprise’s products and establishing business relationships with partners. Therefore, especially when a crisis occurs, the enterprise is recommended to intensify work with business trips, send more managers to distant lands and for a longer period of time. As the author’s experience has shown, issues related to product sales can be effectively resolved on business trips not only by managers of marketing and sales departments, but also by heads of financial, economic and production services, thus strengthening the company’s marketing vector. Therefore, it is necessary not to reduce expenses on business trips for managers, as many enterprises are doing now, but to boldly increase the number of “forays” into foreign markets of our marketing landing party. And speaking about the effectiveness of these events, I would like to draw an analogy with military issues. Who are they throwing behind enemy lines? That's right, the most prepared, experienced special forces. Traveled managers should also become such “aces”, who must carry out special tasks on which the fate of many people today depends.

• Employees who know how to effectively organize their work should be sent on expensive business trips (visiting the maximum number of companies per day and achieving set goals during negotiations).
• The stage of serious preparation for the trip is important (calling, planning visits, preliminary but flexible appointments).
• There must be complete and clear reporting on the results of all meetings and business negotiations, stimulating the rational use of the employee’s time and company funds during a business trip.
• The internal standard or regulation of the enterprise on this issue greatly helps employees in preparing for a business trip.
• It is imperative to try to quickly put into practice all the developments and the results of business trips upon their completion. It often turns out that a business manager needs to come to his senses and rest after a long trip. At this time, no one is dealing with pressing issues, and a week later completely different tasks are being set.

Reducing the cost of hiring external consultants and independent experts

Looking at a problem from the outside always allows you to obtain much more objective, independent information necessary to solve this problem. Involving consultants and independent experts always gives a huge external impetus to business development. This is especially true at critical moments, when it is necessary to act quickly and smartly.

Is the enterprise ready to independently develop a development program? Quickly assess the situation, weigh all the strengths and weaknesses, threats and opportunities, develop a strategy, develop a plan of effective measures? It is clear that not every enterprise can do this. And for those companies that can do this, it would never hurt to have an “infusion” of new ideas, fresh thoughts, and cross-industry progressive experience. Thinking managers pay a lot of money for this and are confident that these costs are recouped many times over. As Chinese strategist Sun Zi said, a leader who does not seek to buy information, an indecisive leader will never succeed. However, despite all the advantages of a company working with external consultants, the question of the effectiveness of this work again arises. Consulting companies promptly, were the very first to prepare their anti-crisis proposals, and each of them offers its own anti-crisis product. It is even more difficult to choose from the variety of anti-crisis proposals than before the crisis. It is clear that each consultant will maximize and actualize the importance for the enterprise of the problem in which he specializes, that is, he has the greatest professional competencies. Therefore, you need to try not to miss in consultants’ proposals those moments that they sometimes try to impose on an enterprise in order to sell their services. And if an enterprise has been working for a long time with an independent expert who takes an unbiased position and does not lobby the enterprise for other types of additional costs in which he himself may be directly or indirectly interested, which accompanies the activities and development of this company, then the costs of this work cannot be reduced in no case. Good consultants are now worth their weight in gold, and many Moscow consulting companies, instead of the widespread staff reductions that are common today everywhere, cannot cope with the work, on the contrary, they are expanding their staff. Therefore, having a company with a time-tested, unbiased external consultant with systems thinking and progressive business development tools is a great advantage, especially during a crisis. And in no case should such an advantage be deprived in difficult moments for the enterprise.

If the company did not have time to decide on consultants before the crisis began, it needs to do this now and quickly. Efficiency using the example of legal consulting: the cost of a comprehensive audit of the legal system of an enterprise will cost $500-1000, but what kind of costs can this help avoid in the future.

Reducing inventory holding costs

Reducing this expense item increases logistics and production risks, which themselves increase during a crisis. This period is associated with the suspension and even closure of many manufacturing companies. If such problems occur at the enterprise’s suppliers, failures may also occur at the carriers.

Advertising expenses

Reducing advertising costs will not lead to tactical and strategic losses only if the company finds other, cheaper and shareware methods of advertising, promotion, and informing buyers, consumers, and partners about its business offers. These could be methods of “guerrilla marketing”, “advertising without advertising” and so on. The lack of financial resources must be replaced by ingenuity, non-standard creative solutions, and serious creative work by the entire team of the enterprise. In no case should you refuse to spend on advertising that “works well”, on those proven channels of communication with consumers that have proven their effectiveness. Advertising and marketing costs, in this case, need to be redistributed in favor of these effective tools.

Reducing costs for maintenance and repairs

Reducing this cost item also increases production risks, calling into question the production processes themselves over time. How much a company can lose from line downtime or more expensive equipment repairs, saving insignificant amounts in the form of maintenance costs. You can save a penny and lose a ruble! In addition, equipment that operates without repairs and wears out during a crisis may turn out to be no longer operational at the beginning of an economic recovery, which will certainly sooner or later replace the crisis period. When the economy starts to grow, the company will not be able to take advantage of the benefits and opportunities of economic growth.

Reduced quality control costs

Some experts made the following recommendations and advice: reduce the cost of products by reducing quality. How high is the quality of goods produced at domestic enterprises? Is there any way to reduce it? Is it possible to effectively compete with such quality in world markets? Or will these products go to the domestic market, protected from foreign competitors? There is no place to reduce quality; it only needs to be increased or not “transfer” of natural resources. Primitivization is not acceptable!

Reducing staffing costs

Personnel costs need to be reduced primarily in those industries in which, during the economic boom preceding the crisis, there was an unjustified hyper-growth of wages, not supported by an increase in labor productivity and an increase in production efficiency. The decrease in these expenses is primarily due to a decrease in bonuses and allowances. However, if other alternatives are not given in material incentives, a sharp drop in already low labor productivity may occur: employees will only “go to work.” Alternatives to salary incentives for key employees may include participation in company ownership, awards for innovation proposals, bonuses for special achievements, non-financial measures, and so on.

As for reducing the number of personnel, economists of the future will most likely treat such a decision as modern doctors today regard the “bloodletting” “successfully” practiced by medieval doctors. Here we will not touch on the macroeconomic consequences of massive staff reductions, unemployment, falling consumer demand and the processes leading to a worsening of the crisis. Today there are numerous examples of large cuts, for example, in the IT business. How much money did it cost to find and hire even the most ordinary programmer? How much money was invested in his training? How much effort and money does the company devote to team building, motivation, development of corporate culture, and professional improvement? And now, along with the employees, investments in human personnel are leaving the company, know-how is leaving, information is leaving. And with the advent of the era of information technology, all this becomes the main factor of competitiveness and a source of innovation. There is a second point here: what happens to the employees who remain in the company? People understand that they may be next, they stop trusting management, and the level of loyalty goes to zero. At the next corporate meeting, will they believe the fiery speeches of top management about a friendly and united team? And what then are statements about the social responsibility of business worth?

Like “bloodletting” during staff reduction, firstly, the company loses valuable resources, and secondly, the enterprise “weakens its body.” E.W. Deming, the author of the Japanese miracle, proved that the efficiency, productivity, effectiveness of both the entire business and the individual employee depend only on the management, the management system built in the company, and not on the employees themselves. Any employee, even the most lagging one, can be “put” into a system where he will demonstrate the highest results. The staff needs to be trained! And as the proverb says: “There are no bad students, only bad teachers”! Of course, none of this is easy. To preserve the team, you need to think in intensive, fundamental, deep, systemic categories and principles, and during the period of the economic boom that preceded the crisis, we became accustomed only to superficial, extensive thinking. Not only management, but also the staff themselves need to think, take initiative, and look for ways out of the crisis. It is imperative to take into account that many people have forgotten how to think, strain their brains, fight for efficiency, and work hard like Stakhanov. In many industries, people have become accustomed to fast, easy and big money without measuring their own contribution to getting that money, creating real value for the customer and for society. In the near future, many workers will have to come down to earth again in relation to their financial and material demands and work much more and for much less money than before.

One of the most effective recommendations: to maximize and intensively use the (often) dormant intellectual and creative potential of staff, to stimulate entrepreneurship, rationalization, and innovation at all levels of the organization.

It must also be remembered that personnel costs are not limited only to the payment of wages and related social and tax payments. Calculate, for example, how much it costs to rent a workspace and the lost profit from renting out this space. There is a good solution: transferring at least part of the office staff to “virtual” or “home” staff, which has already found wide application in the West, and which many have already taken advantage of. Thanks to the development of modern information technologies, it is possible to organize the work of intellectual workers in such a way that all personnel work from home, and management and communications are carried out using the Internet. This type of work organization has many advantages, both for employees and for the company. Among the obvious shortcomings: discipline. However, if an employee is not disciplined and organized, will he work effectively in the company office itself?

Expenses that should be reduced

“Universal” expenses that can be safely reduced without any significant losses in the long and short term.

• Elimination of losses in production: saving fuel, electricity, raw materials. The introduction of “lean production” technologies is a very loud word for many enterprises with our still Soviet culture. However, we need to strive for this; the crisis is pushing us towards this.
• Reducing the costs of “maintaining high status.” This could also mean moving to a less prestigious and less expensive office. “Condensation” of services, departments, personnel in occupied premises, abandonment of excess space and leasing, subleasing, and so on. This can also be a reduction in the cost of company vehicles, if it is equipped with expensive and uneconomical business class cars (fuel consumption, maintenance costs), thanks to the transition to “small cars”, the reduction of company vehicles
• Refusal to pay dividends to founders and shareholders in favor of strengthening financial positions, creating a stabilization fund for the enterprise, for the company’s survival during a crisis period. This also includes the refusal of “indiscriminate” payments of bonuses and allowances. However, the funds saved due to these measures must be invested in development, and not “wasted.”
• A whole section of so-called “hidden or implicit costs” that everyone forgets about. These are the costs of lost or lost profits. These costs are not reflected in any reports, so no one fights them. At the same time, if we go to any large industrial enterprise, will we see that every square meter of space and every machine is used effectively and efficiently? And if you rent out unnecessary things or organize production groups, cooperatives, teams from the “extra” people at the enterprise and help them develop new areas of work, then you can not only save money, but also make money.
• Stationery supplies and office expenses are not a big item, but, as they say: “A penny saves a ruble”! Our people are no strangers to saving paper by printing on drafts, saving cartridges by switching printers to energy-saving printing modes, which is what everyone did 10 years ago. This also includes basic frugality in relation to electricity, water, heat, and so on.
• Expenses for components and materials purchased by the enterprise. A generally accepted mechanism throughout the civilized world is considered to be a gradual systematic reduction in the cost of the mechanisms of units and components of long-produced models. All Japanese companies approve price reduction schedules and plans for improving the quality of production of purchased products with their suppliers. Therefore, our enterprises can conclude not only contracts and supply agreements with suppliers, but also long-term agreements on the quality of supplied goods (control and development) and schedules for the gradual reduction of the purchase cost of components.
• Of course, this also includes spending on areas that appeared in the wake of the previous economic boom and hyper-growth of the B2B sector. Today, probably, not a single director will have a question: “Should I pay tens and hundreds of thousands of dollars to a creative agency for the logo and slogan of a subsidiary or should I work on this task on my own?”

Expenses that the company will have to increase

Costs that it is appropriate for a business to incur in order to minimize risks and reduce costs that the firm might otherwise incur in the future.

• Expenses related to the economic security of the enterprise. It is necessary to carry out a set of preventive measures to eliminate many risks, the likelihood of which increases during periods of crisis. It is recommended to strengthen the enterprise’s risk management system, legal system, security system, anti-crisis PR system, and so on. Conduct legal audit procedures of all aspects of the company's activities. Conduct an anti-crisis audit of the information security system.
• Expenditure or investment in human resources. These are expenses primarily for maintaining morale (corporate ideology, internal anti-crisis PR), since no matter how much an enterprise reduces costs, the crisis cannot be overcome without the support and sparkle in the eyes of employees. And the crisis provides excellent opportunities for team building. This also includes the costs of retraining and retraining of personnel, which also cannot be avoided. Many European companies that sent their employees on unpaid leave for 1-2 months organized for this period corporate training programs for personnel, reassignment, retraining and retraining in other areas and areas of activity to prepare people to perform other work and solve other problems.
• Expenses on marketing, conducting marketing and scientific research, on the development of new products, design and introduction into production of new types of products, expenses on the formation of our own distribution network independent of external credit injections. All this is critically necessary for companies planning to operate both during and after the crisis, and not to curtail their business in the near future.
• Expenses for the development of the enterprise in the form of remunerations and payments for innovation proposals, for the introduction of new less resource-intensive and resource-saving technologies, for the optimization of business processes that allow increasing the efficiency of production and the company’s business.
• Costs required for business reorganization and renewal, innovation and enterprise development. The economy and business after the crisis will not remain the same as they were before the “collapse”. The business world will change a lot, as it always happens, there will be a redistribution of resources again: financial, production, intellectual, there will be changes in the balance of power in the market and in politics. Almost all business analysts and top managers of large companies are trying to find a new path and even a new business paradigm. Therefore, each enterprise will have to go through its own path of changes in the organizational structure, corporate culture, and building relationships on many levels, and this, in turn, will require investments.
• Expenses for business integration, organization and financing of business and industry unions, associations, clubs. Even large and very strong companies will soon find themselves in a difficult situation, in which it is easier to resolve many issues in cooperation with their former competitors, coordinating the entire industry. Many things can now be solved much more effectively if we act together, together, thinking about the effect on the entire industry, regional and general economic system. Coordination of actions, common interests, joint resolution of complex issues in government bodies, association for joint procurement of raw materials and materials, supply, production, sales cooperation and economies of scale will give companies a number of additional advantages during this period. However, this is impossible without the full and active work of the apparatus, the coordinating body of such a union or association, which needs an appropriate budget.

Cost management at an enterprise during a crisis should not be budgetary or automatic, when items are highlighted and limits are set, but “manual”, when the feasibility of each payment and the effectiveness of all costs separately are studied. Cost management must balance tactical needs and strategic objectives, finding a middle ground between them.

A crisis and a reduction in expenses at an enterprise provide employees and department managers with a good opportunity to explain their omissions and failure to achieve their goals. To prevent this from happening, you can use the management approach practiced in many Japanese enterprises: this is working with pairs of opposites. When setting goals, dual, sometimes even mutually exclusive goals should be set: reduce cost and improve quality, reduce weight and increase stability, and so on. This will not give people the opportunity to write off all their shortcomings as cost savings. And, in addition, this also helps the Japanese to find fundamentally new solutions that lie beyond these pairs of opposites that limit the mental field.

It is important to find wise solutions characterized as a “golden mean”. As Henry Ford said 100 years ago, cost management should be neither greedy nor wasteful. Both of these extremes lead to overspending, causing immediately or after some time new problems and even greater costs to solve them.

I would also like to warn managers that “tightening the screws” and “tightening their belts” is not enough for the company to get out of the crisis. This is just one direction in which we should move today. For the survival of an enterprise, a whole system of measures is necessary:

• Reducing costs, reducing irrational costs, that is, in fact, “tightening the screws.”
• Increasing economic efficiency and return on all costs, resources and investments.
• Increasing the income component of the business, intensifying marketing activities.
• Search for alternative solutions that allow replacing cost-intensive solutions with “no-cost” and “low-cost” options.
• Development of business systems (production, marketing, logistics, HR, R&D, etc.), rationalization activities, optimization of business processes.
• Search and adoption of fundamentally new fundamental solutions for organizing and conducting economic activities, up to changing the business paradigm.

At the moment, attempts are being made at the global, national, regional, industry, and corporate levels to neutralize the negative consequences of the global financial crisis. However, at all these levels, measures are used and decisions are made that are the causes of the current situation, that is, which gradually led to the crisis. And if the emphasis on supporting the banking system and stimulating consumption can give a positive result in the short term (for individual elements of the system, and not for the entire system), then this will not last long. As Albert Einstein said: “You cannot solve a problem at the same level at which it arose. We need to rise above this problem by rising to the next level.” And if fundamentally new solutions are not found that will radically change the economic model and economic management systems, then the crisis will develop from the category of a global economic crisis into the category of a global crisis of civilization. In addition, crises of this scale and depth always lead to the discovery of new technical solutions, new technologies, new energy sources, new labor organization systems, and renewal in many areas, sectors and branches of the economy. And even if we ourselves do not come up with fundamentally new approaches to work, then at least we must not miss the change in the business paradigm and not again find ourselves beyond the boundaries of opportunities and prospects.

The period we have entered is not easy, but as a result, imagine how we will learn to manage the costs and efficiency of our companies! How many progressive solutions will be found during this time that we would not even be looking for if not for the crisis! And we will look at the past periods as times of ineffective business and missed opportunities and ask ourselves why we previously thought so little about efficiency and development.

Chapter 3. Optimization of costs in an enterprise

Due to the deterioration of the financial and economic situation at enterprises, which has worsened due to the manifestation of the negative trends of the global financial crisis, which has already become an economic crisis, many companies are beginning to panicky reduce their costs. Company management sees cost reduction as one of the main recipes for survival during a crisis. Therefore, in the pursuit of savings, even entire cost items began to be “cut off” indiscriminately. Decisions, of course, need to be made very quickly, almost instantly, in such situations. And decisions regarding costs and expenses are some of the easiest decisions that management will have to make, since they relate to what the company actually owns, cash, as opposed to making, for example, strategic, marketing, innovation decisions, the adoption of which, due to growing uncertainty, has become even more difficult. Therefore, it is clear that the easiest way is to “tighten the belts” and “tighten the nuts.” However, thoughtless reduction of expenses and “tightening of belts” can lead to negative strategic consequences and tactical losses. When making hasty decisions to reduce costs, categories of “good” or highly productive expenses that bring a huge multiplier economic effect to the company are also often overlooked.

We need to fight to reduce not all, but only unproductive, ineffective, irrational costs. You need to ask yourself the following questions:

How can you intensify, increase the impact and efficiency of costs that the enterprise is going to reduce.

How will a reduction in one or another cost item affect the company in one, two, three, five and ten years?

What risks are associated with certain expenses, and how will reducing expenses affect the likelihood of these risks occurring?

Does the volume of a certain cost item have “critical weight”, what are the tasks and functions assigned to these costs?

What alternative solutions are available? How can you compensate for cost reduction?

Reducing inventory holding costs.

Reducing this expense item increases logistics and production risks, which themselves increase during a crisis. This period is associated with the suspension and even closure of many manufacturing companies. If such problems occur at the enterprise’s suppliers, failures may also occur at the carriers.

Reducing advertising costs will not lead to tactical and strategic losses only if the company finds other, cheaper and shareware methods of advertising, promotion, and informing buyers, consumers, and partners about its business offers. These could be methods of “guerrilla marketing”, “advertising without advertising” and so on. The lack of financial resources must be replaced by ingenuity, non-standard creative solutions, and serious creative work by the entire team of the enterprise. In no case should you refuse to spend on advertising that “works well”, on those proven channels of communication with consumers that have proven their effectiveness. Advertising and marketing costs, in this case, need to be redistributed in favor of these effective tools.

Reducing costs for maintenance and repairs.

Reducing this cost item also increases production risks, calling into question the production processes themselves over time. How much a company can lose from line downtime or more expensive equipment repairs, saving insignificant amounts in the form of maintenance costs. In addition, equipment that operates without repairs and wears out during a crisis may turn out to be no longer operational at the beginning of an economic recovery, which will certainly sooner or later replace the crisis period. When the economy starts to grow, the company will not be able to take advantage of the benefits and opportunities of economic growth.

Reducing staff costs.

Personnel costs need to be reduced primarily in those industries in which, during the economic boom preceding the crisis, there was an unjustified hyper-growth of wages, not supported by an increase in labor productivity and an increase in production efficiency. The decrease in these expenses is primarily due to a decrease in bonuses and allowances. However, if other alternatives are not given in material incentives, a sharp drop in already low labor productivity may occur: employees will only “go to work.” Alternatives to salary incentives for key employees may include participation in company ownership, awards for innovation proposals, bonuses for special achievements, non-financial measures, and so on.

Expenses that should be reduced.

- “Universal” expenses that can be safely reduced without any significant losses in the long and short term;

Elimination of losses in production: saving fuel, electricity, raw materials. The introduction of “lean production” technologies is a very loud word for many enterprises with our still Soviet culture. However, we need to strive for this; the crisis is pushing us towards this;

Reducing the costs of “maintaining high status.” This could also mean moving to a less prestigious and less expensive office. “Condensation” of services, departments, personnel in occupied premises, abandonment of excess space and leasing, subleasing, and so on. This can also be a reduction in the cost of company vehicles, if it is equipped with expensive and uneconomical business class cars (fuel consumption, maintenance costs), thanks to the transition to “small cars”, the reduction of company vehicles;

Refusal to pay dividends to founders and shareholders in favor of strengthening financial positions, creating a stabilization fund for the enterprise, for the company’s survival during a crisis period. This also includes the refusal of “indiscriminate” payments of bonuses and allowances. However, the funds saved due to these measures must be invested in development, and not “consumed”;

A whole section of so-called “hidden or implicit costs” that everyone forgets about. These are the costs of lost or lost profits. These costs are not reflected in any reports, so no one fights them. At the same time, if we go to any large industrial enterprise, will we see that every square meter of space and every machine is used effectively and efficiently? And if you rent out unnecessary things or organize production groups, cooperatives, teams from the “extra” people at the enterprise and help them develop new areas of work, then you can not only save money, but also make money;

Expenses for components and materials purchased by the enterprise. A generally accepted mechanism throughout the civilized world is considered to be a gradual systematic reduction in the cost of the mechanisms of units and components of long-produced models. All Japanese companies approve price reduction schedules and plans for improving the quality of production of purchased products with their suppliers. Therefore, our enterprises can conclude not only contracts and supply agreements with suppliers, but also long-term agreements on the quality of supplied goods (control and development) and schedules for the gradual reduction of the purchase cost of components.

Cost management at an enterprise during a crisis should not be budgetary or automatic, when items are highlighted and limits are set, but “manual”, when the feasibility of each payment and the effectiveness of all costs separately are studied. Cost management must balance tactical needs and strategic objectives, finding a middle ground between them.

A crisis and a reduction in expenses at an enterprise provide employees and department managers with a good opportunity to explain their omissions and failure to achieve their goals. To prevent this from happening, you can use the management approach practiced in many Japanese enterprises: this is working with pairs of opposites. When setting goals, dual, sometimes even mutually exclusive goals should be set: reduce cost and improve quality, reduce weight and increase stability, and so on. This will not give people the opportunity to write off all their shortcomings as cost savings. And, in addition, this also helps the Japanese to find fundamentally new solutions that lie beyond these pairs of opposites that limit the mental field.

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Thoughtless waste of funds in any business leads to complete collapse and bankruptcy. In Russia, proper cost optimization is especially important. For an enterprise to be successful, the amount of income must significantly exceed the amount of costs. Reducing waste is done by analyzing the company's current estimates, searching for expense items that can be eliminated painlessly for production.

Basic principles of cost optimization

Conduct optimization of enterprise costs it is possible based on 3 models of reducing expenditure items in the budget. According to the chosen model, finances in the company are spent according to certain principles. For optimization, the following models of financial planning and waste reduction are proposed:

• High-speed;
• Fast;
• Systematic.

The new financial discipline at the enterprise is approved by order of management. The accounting department is tasked with monitoring and complying with the new rules.

Speed ​​cut

With this model, the company's expenses are divided into several groups. Based on the priority of expenses, the possibility of terminating funding is calculated:

• High priority costs. Cost items include the purchase of necessary raw materials, payment of personnel, etc. Without high-priority expenses, the enterprise will not be able to continue its activities;
• Priority spending. A group of expenses, if excluded, disruptions to the company's operations will occur. It is not advisable to optimize expenses from the priority group.
• Allowable expenses. This group includes funding for staff training and benefits. Eliminating the expenditure of funds on this group is possible, especially in cases of financial distress of the organization.
• Unnecessary expenses. Financing of events that do not in any way affect the company’s activities and production quality. Funding for this group can be easily refused.

Quick cut

The model does not provide for a complete rejection of certain groups of expenses, but savings on current financial expenses:

• Reducing the cost of purchasing materials and raw materials. Before how to optimize costs on the main production processes, the possibility of a drop in product quality should be considered. A common practice is to review existing contracts with suppliers or search for new partners.
• Reducing costs for transport and communication services. As a classic solution, the vehicle fleet is reduced, new contracts are concluded for the Internet, telephony, and electricity supply. The entire economic part of the company is subject to evaluation and the search for cheaper options.
• Reduced wages and staff. Most institutions resort to this option first. Personnel should be optimized carefully so that the lack of workers does not harm the production process. If salaries are reduced, the missing amounts should be replaced with benefits, free food, and improved medical care. insurance, etc.

Systematic reduction

The model implies careful management of all budgetary costs and operating mechanisms of the organization:

• Reducing the amount of investment for the sake of quality. Most organizations invest in developing new technologies to make a profit. Inventory management and optimization investments will only be beneficial if investments concern only promising projects.
• Modernization of trade relations and constant search for new suppliers. Local governments or company management are looking for more favorable contracts with material suppliers without loss of quality.
• Lean. The content of the company is considered from the point of view of the potential client. Particular attention is paid to the final product, and not to the method of its manufacture, thereby reducing production costs.

The systematic method is the most time-consuming, but brings stable results in optimizing production costs.

What you can save on - safe optimization

Optimizing enterprise expenses carries a certain danger. Removing or skimping on important funding items in companies' budgets can lead to commercial failure. There are several expense items, savings on which will not bring significant losses to production:

• Improving the qualifications of employees through seminars, forums, and trainings;
• Replacement of current communication tariffs and Internet options with a lower cost;
• Cancellation of long-distance business trips if they are not necessary or do not play a significant role in the operation of the enterprise;
• Termination of cooperation with expensive consultants and other external employees;
• Partial transfer of staff to remote work;
• Optimization of enterprise inventories to prevent the risks of delays in deliveries or unnecessary costs for warehouse services;
• Search for inexpensive advertising placements, reducing advertising costs.

Expenses you can't avoid

When optimizing production at an enterprise, it is strictly not recommended to delete expense items for the following items:

• Expenses for equipment maintenance and repair. Lack of service support leads to breakdowns and downtime of the production process, and financial losses for the company.
• Product quality control. A system for controlling production and goods produced by the company will help you not to lose customers and gain new ones.
• Staff maintenance. Paying employees allows them to be motivated to perform their duties. Lack of personnel also negatively affects production and sales of products.

Operating and purchasing costs are the norm in any business. Optimization is designed to improve the financial position of the company without harming the production and popularity of products. Additional advice on optimization rules and methods can be obtained from the specialists of the company "".

Unreasonable and uncontrollable costs are one of the most pressing problems of most companies. To reduce costs, a clear program with a whole range of measures is required. One of the most important stages is cost structure analysis.

Let us illustrate the effect of cost reduction For example.

Regulations for reducing production costs of the Alpha group of companies

Any use of materials is permitted only with a hyperlink.

Expenses are only those costs that participate in the formation of profit for a certain period, and the remaining part of the costs is capitalized in the company’s assets in the form of finished products, work in progress, remnants of semi-finished products for own consumption, unfinished capital construction projects, intangible assets, etc. ( a simplified diagram based on IFRS standards is presented in Fig. 2). In other words, expenses are a decrease in assets or an increase in liabilities, resulting in a decrease in capital that is not associated with the distribution of profits to shareholders.

Payments are the movement of funds paid for supplied resources. Costs and payments vary by the amount of change in inventories and accounts payable for the period under review.

Note that all these concepts should be distinguished in order to avoid a number of mistakes. For example, controlling expenses based on information from the income statement is not . With an increase in finished goods inventories and a simultaneous decrease in sales, costs according to the company decrease, and costs increase. However, managers may not respond to this adverse situation in a timely manner.

The confusion of the terms “costs” and “payments” leads to the fact that the management of the enterprise tries to control costs by limiting payments to creditors. As a rule, this entails an increase in the cost of resources used in production (cost volume), while maintaining their volume, since you will have to pay not only the resources themselves, but also a commercial loan.

• Company cost management>>

Cost reduction measures

Reducing costs involves a whole range of measures.

1. Establishing a connection between cost management and budget management systems.
2. Identification of promising areas for cost reduction.
3. Development of an action plan to reduce costs.

Let's look at each of these stages in more detail.

The experience of foreign companies shows that cost management is effective only if it is strictly linked to the budgeting system. When developing a budget, an enterprise limits the amount of planned costs and thereby manages them. The company's budget can be drawn up using cost standards (rationing), as well as by strictly limiting the costs of structural divisions and setting limits by the company's management (limiting). As practice shows, the combination of these methods is optimal: limiting is applied to those cost items for which standards have not been established (commercial and general expenses, etc.). At the same time, enterprises that use only rationing or only limiting operate successfully.

• Justified savings. How to painlessly reduce fixed costs

Personal experience
Andrey Galaida, Head of the Budget Department of the AHR of the Norilsk Nickel company

Enterprise cost planning is one of the most effective tools for managing them, but, unfortunately, it is well forgotten. For progressive development, the plans of the enterprise must be realistic, but tough.

In our company, cost management begins at the stage of submission of applications by departments for the allocation of the necessary funds to complete the tasks assigned to them. One of the effective tools is commercial expertise. Specialists who know the market situation analyze the validity of the application in terms of compliance with its cost for the purchased goods (services).

A necessary condition for linking budgeting and cost management systems is the presence of a single management body - the budget committee. To manage costs, it is most advisable to form a matrix structure of the budget committee, when each cost item is controlled by both the head of the budget center and the head of the functional center (see Fig. 3). The chairman of the budget committee is the company's CEO. This allows enterprise management to participate in cost management and, equally important, determine those responsible for the use of resources.

Reference
A functional center is a group of budget items united according to functionality. The head of a functional center is a company manager responsible for a specific area of ​​management throughout the enterprise, for example, the HR director is responsible for personnel management throughout the company. The heads of budget centers (financial responsibility centers) are, as a rule, heads of departments (for example, the head of the sales department). Consequently, costs for the item “Salaries of sales specialists” are controlled by both the head of the sales department and the HR director. (The information was prepared by the editors of “Financial Director.”)

Cost management begins with drawing up the first version of the company's budget. If this option does not suit the company’s management or owners, then the planned budget items, including cost ones, are adjusted.

Personal experience
Andrey Galayda

If there is a need to reduce costs, we proceed as follows.

We divide all cost items of any department into three groups:

• costs that are not subject to revision due to strict obligations on the part of the enterprise (salaries, concluded contracts);
• costs associated with obligations that can be revised (there is a possibility of terminating contracts, but penalties may follow);
• costs that can be rejected or deferred to other periods without significant damage to the enterprise.

Based on this classification, cost optimization occurs by gradually eliminating cost groups: first, costs from the third group are reduced, then from the second, and only as a last resort from the first. Note that a revision of the costs of the first group will lead to the need for structural changes: staffing, wages, etc.

Department heads, as a rule, are tasked with developing a set of measures necessary to reduce costs to the level required by management. In other words, they must answer the question: what needs to be done to ensure that costs do not exceed a given amount. As practice shows, in most cases it is possible to optimize costs by making organizational changes in the company. However, sometimes more drastic measures may be required to reduce costs: changing equipment to more productive ones, introducing energy-saving technologies, etc.

What approaches to reducing costs are recommended by Elena Mitrofanova, head of OFER projects at IBS, watch the video.

Cost Analysis

To identify costs that can be reduced, it is advisable to use the following types of analysis (or a combination of them):

• cost structure analysis;
• comparative analysis;
• cost driver analysis.

Cost structure analysis. In order to analyze the cost structure of an enterprise, vertical, horizontal and trend analysis are used. Using vertical analysis, the cost structure is determined: the share of each cost item in the total cost of the enterprise is calculated and the most significant items are identified. Thus, you should not expect significant savings as a result of reducing a cost item that amounts to 1% of all enterprise expenses.

Based on the results of the vertical analysis, cost diagrams are compiled indicating the share of each item in the company's total costs.

Horizontal analysis is based on a comparison of each item of reporting cost with the previous period (month, quarter, year), that is, deviations of the indicators of the reporting or planned period from the previous one are determined.

After carrying out vertical and horizontal analysis, trends in changes in cost items should be analyzed, that is, a trend analysis should be carried out. It allows you to determine possible values ​​of indicators in the future, that is, to predict the values ​​of various indicators (volume of revenue, amount of costs, etc.) provided that the current dynamics are maintained.

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Comparative analysis. This analysis is based on a comparison of the company's most significant indicators with similar indicators of competitors or with industry averages. It allows you to draw conclusions about the competitiveness of the enterprise, as well as the availability of cost reduction reserves. Note that in market conditions it is quite difficult to obtain data on the activities of competitors necessary for conducting a comparative analysis. Cost structure analysis and comparative analysis make it possible to determine areas for cost optimization. To make specific management decisions, a methodology for identifying and analyzing cost carriers is used.

Identification and analysis of cost drivers. Cost carriers are those factors that have a direct impact on the amount of costs for a particular item. All cost drivers can be divided into three groups: the design of the product being produced (what you produce), production technology (how you produce and sell) and production management (how you manage the company).

Let's consider which cost carriers can be identified in each group (see Table 1). To analyze cost carriers, diagnostic questionnaires are used (see example 1). They can be developed both by managers responsible for developing cost reduction measures and by third-party consultants. The survey is conducted among the company's employees. Each structural unit answers those questions the solution of which is within its competence.

Table 1. Grouping of cost objects

Example

Cost Object Diagnostic Questionnaire (excerpt)

I. Cost carriers - design and characteristics of products

Questions.

1. Does your product design include:

• which can be removed without compromising quality;
• which can be replaced with cheaper parts?

2. Is it possible to achieve savings in raw materials (electricity, labor) by using a different design? Is it possible to produce a simpler product with fewer employees and fewer machines?
3. Can the products be further standardized?

4. What will be the effect of using the new simplified and cheaper design in relation to:

• satisfying consumer requests;
• cost reduction;
• quality/cost?

5. What do buyers value more - quality or price? Has there been primary research to support this?
6. Are all product features (size, color, etc.) important?
7. Does the product have qualities that consumers are not willing to pay for?
8. Does the position of the product on the market correspond to its cost?
9. What effect will a decrease in quality, a reduction in design complexity, and product rationalization have?

• for sales (that is, for consumers);
• on costs;
• on profitability?

...
IV. Cost carrier - production scale

Questions.

1. What is the current percentage of capacity utilization?
2. What would be the cost if capacity were fully utilized?
3. Would increasing the scale of production affect the increase in product competitiveness or profitability?
4. Can new distribution channels be found to utilize excess capacity and benefit from cost savings?

As a result of the survey, those cost carriers are identified that are used by the company ineffectively or which can be abandoned without compromising product quality and reducing sales volumes.

So, using cost analysis, we identified those that are growing monthly, as well as the costs that occupy the main share in the company’s total costs, compared the company’s significant indicators with those of competitors, and, finally, identified the cost carriers that influence their value.

Cost reduction action plan

The next step is to develop an action plan to reduce costs.

2. Action plan to improve the efficiency of resource use

The cost reduction action plan includes the following provisions.

1. Name of the event.
2. The focus of the event (which cost item will be optimized).
3. Factors influencing a cost item (cost carriers).
4. The essence of the event (decision to optimize costs).
5. Cost of the event.
6. The effect of the event.
7. Persons responsible for the implementation of the event.
8. Implementation deadlines.

Example
Based on cost analysis, FES specialists revealed that personnel costs are increasing most rapidly, which at the same time constitute a significant share of all enterprise costs. An action plan was drawn up to improve the efficiency of using human resources and reduce labor costs (see Table 2).

Table 2. Action plan to improve the efficiency of resource use

When developing an action plan to reduce costs, it is important to correctly assign responsible persons for the implementation of each activity. We often encounter the fact that economists, financiers and accountants are responsible for costs. This is not true. Company managers (heads of production departments, functional directors) must be responsible, since only they own the technology, manage production and other business processes, and make decisions within the framework of the production and economic activities of the enterprise. The role of the financial and economic service is to establish the rules of the game: developing classifiers and reference books, introducing management accounting and budgeting, as well as providing managers with information for decision-making. And most importantly, the general director of the company should be interested and involved in costs and their reduction - the whole process should take place under his leadership.

In conclusion, we note that it is not enough to develop measures to reduce costs. Often you need to overcome the resistance of your own employees, who believe that it is not worth spending additional effort on this process. Therefore, it is important to develop provisions for rewarding employees for savings.

For example, one of the enterprises has the following personnel motivation system. When implementing the developed measures and reducing costs after the reporting period, the division receives at its disposal 50% of the saved amount, while part of the amount received goes to development (up to 60%), and the rest is used as material incentives for employees.

Personal experience
Yuri Gorlin, Head of the Labor and Social Programs Department of Norilsk Nickel

Our company uses a number of employee incentive systems, which should facilitate cost optimization measures. These systems apply to both managers and workers.

As an example of a mechanism for motivating employees, one can cite the procedure for the formation and distribution of a collective incentive fund, introduced in 2003. The main asset-forming indicators include compliance with production costs provided for in planned targets, as well as inventory balances. In addition, adjustment coefficients for the collective incentive fund have been established: for each percentage reduction in costs relative to the planned level, the incentive fund increases.

Thus, if both ordinary employees and top managers of the company are interested in reducing costs, then cost management should yield positive results.

The head of the enterprise takes the report, looks at the expense items and asks what and where else to cut. A familiar picture, isn't it? How to optimize costs and at the same time increase profits is an eternal business question. I propose to discuss ways to optimize enterprise costs.

Cost optimization is one of the first responsibilities in the job description of any financier. While some enterprises are fighting to reduce costs by a fraction of a percent, others could immediately reduce their budget expenditures by 20% or more, but for some reason they do not. Let's see, is cost optimization a fashion or a reality?

Reduce or optimize costs

When trying to reduce costs at the stage of layout of the annual financial plan, it quickly becomes clear that straight-line cutting of budget expenditure items does not work. For items shortened “on paper”, there will most likely be an overspend when summing up the results. Why should it be different if all business processes remain unchanged?

Where to start optimizing enterprise expenses

The concept of expense is not tied to a period and means a decrease in the value of an asset. Costs are only those expenses that are included in the financial result of a given period. No expense in production activity occurs on its own. Every ruble spent, every decrease in the value of assets is caused by a specific business process. As simple as this may sound, this is the key point on which all effective cost management techniques are based.

Each enterprise can be represented as a chain of processes. It receives some resources, which, going through this sequence, are modified, acquiring the output form of a product or service. Moreover, each link in the chain is a specific function, which for its implementation requires certain resources and has its own cost.

Based on this understanding, both cost reduction and optimization should begin with an analysis of business processes. It is necessary to identify their compliance with costs, and then solve the problem of reducing the resources spent and increasing productivity. This is where real cost optimization in an enterprise lies.

Which method of grouping costs is more suitable for the purpose of optimizing costs in an enterprise?

When optimizing costs at an enterprise, the most common approach is to group costs by structural divisions of the organization. This model can be called traditional; in different versions it represents approximately the same table, with a list of types of costs (rent, salaries, taxes, etc.), grouped by departments of the enterprise. Depending on the scale of activity, such tables may be larger or smaller, may have varying degrees of detail and automation, but their essence remains the same.

This approach to grouping costs is justified for calculating net profit and assessing the contribution of each division to it, as well as for some basic analytics. But it is practically useless for optimization purposes, optimizing company expenses, because such a link to the organizational structure does not tell anything about the cause-and-effect relationships between expenses and processes. It allows you to determine the amount of costs, but does not make it possible to manage them, and does not give any answer to the question “what to do?”

Another method of grouping – into constants and variables – is better, but also not informative enough. Complicated options with the addition of semi-fixed and semi-variable costs, it’s even hard to say which is more, clarify or confuse the picture.

Grouping for the purpose of optimizing costs in an enterprise correlates costs with the processes that caused them. Outwardly, it is similar to the form of the financial results statement and in general looks like this:

• Input cost of raw materials, materials, goods for resale;
• Production costs;
• Costs of financial transactions;
• General and administrative costs.

However, despite the external similarity, the fundamental difference lies in the way costs are distributed within these groups - not according to the organizational structure, but according to homogeneous functions.

Ways to optimize production costs at an enterprise

To optimize production and some types of administrative and management costs of a company, it is good to use functional cost analysis methods adapted to a specific situation. The sequence of actions in the general case looks like this:

1. Make a list of functions that are currently performed within the enterprise.
2. Align each function of the performer with the necessary expenditure of labor, time and other resources.
3. Identify the most expensive features.

This is the first, formal step, after which comes the creative stage. There are no ready-made solutions or recipes for specific activities, just as there are no formalized algorithms, but this is where the success of optimizing a company’s expenses lies:

• find ways to reduce the cost of the most resource-intensive functions;
• identify and eliminate unnecessary or duplicative functions;
• find opportunities to share one resource with different functions.

If at least some of these solutions are found, it will be possible to reap the benefits of the optimization, redistribute freed resources between the most effective functions, or direct them to other areas.

Even if it is not possible to get a quick effect, the work done will in any case be of invaluable importance for the management of the enterprise. The resulting map of functions and their relationship with costs will allow for targeted allocation of resources and make the budget system more realistic.

Case Study

In practical work, methods of functional cost analysis in their full classical form can turn out to be unreasonably labor-intensive; it is often sufficient to use simplified schemes. Let's look at their application using a real example.

The distribution company's shareholders set a goal of reducing costs by 20%. The analysis showed that one of the most expensive functions was free delivery of goods to customers. Once upon a time this function was absent, the goods were not delivered, and customers received them on a pickup basis. Later, the introduction of such a service became a strong competitive advantage and allowed it to expand its customer base, significantly increasing its market share. However, then the situation changed, competitors also had free delivery, and now fierce competition made it impossible to either refuse this service or include the cost of delivery in the sales price. Buyers also did not want to pay for delivery separately, because you can place an order from competitors, and they will deliver it for free.

We were faced with the task of reducing the cost of the function. During the analysis, we studied all the factors influencing its implementation:

• geography of orders, distance from the central warehouse, delivery time;
• time, frequency, order volumes, number of clients;
• factors of seasonal growth and decline in demand;
• procedures for collecting applications and their formation in the warehouse;
• geographical location of competitors' warehouses and their delivery conditions.

As a result, the following solutions were found and implemented:

• the company's territory of operation (several regions) was conditionally divided into zones based on the number of clients, their geographical proximity and the total volume of supplies;
• a delivery schedule has been drawn up at different frequencies for different zones depending on the above factors;
• free delivery was canceled at several locations;
• regulations for loading and unloading operations have been developed, the warehouse operating mode has been changed to reduce the total delivery time;
• The closing time for accepting applications for the next delivery has been introduced;
• The economically justified minimum order size for free delivery has been calculated and established.

The result of all these measures was a reduction in transportation costs of the distribution company by 30%, and delivery volumes not only did not decrease, but also increased.

Methods for optimizing company overhead costs

General business expenses most often serve the function of supporting the activities of the enterprise as a whole, and cannot be decomposed into component processes that could be analyzed as described above.

In such cases, the most reasonable way to optimize the costs of an enterprise seems to be the standardization of selected relative and absolute indicators, for example:

1. Average cost of 1 m2 of office space.
2. Average office space per office employee.
3. Average amount of utilities per meter of rented area.
4. Average cost of equipment for one workplace.
5. Average consumption of office and household supplies per employee.
6. Revenue per administration employee.
7. The number of clients per one administration employee (sales department, accounting department, etc.).
8. Share of wages of administrative personnel in the total payroll.

And many other indicators. The scope for creativity here is limitless; it is only important to maintain a balance so that the pursuit of some indicators does not lead to a deterioration in the performance of other functions or subtasks. For this scheme to work, in addition to the coefficient system itself, you need:

1. Appoint responsible employees who can influence their value.
2. Set indicator values ​​as KPI these employees.

Of course, this implies that the indicators must be real and measurable, and the calculations must be transparent and understandable for both parties.

Optimization of financial expenses

In the proposed concept, all costs associated with cash flow are classified as financial. In addition to direct banking services, this includes a number of other costs, usually considered general or administrative. A complete list of financial costs could be as follows:

1. Settlement and cash services.
2. Foreign exchange transactions and exchange control.
3. Interest on loans and borrowings payable.
4. Services of payment system operators.
5. Services of non-bank payment agents.
6. Acquiring.
7. Collection.
8. Maintenance of fiscal registrars and OFD services.
9. Salaries of cashiers, account accountant, special official for compliance with 115-FZ.
10. Some types of taxes and contributions.

This grouping may seem unusual at first glance, but in reality it provides a more precise match between costs and functions than traditional classifications.

Despite the fact that these are the costs of one group, different approaches are required to optimize them. Some of them are initially tied as a percentage to the volume of funds passed through, while others, on the contrary, are fixed and do not depend on turnover in any way. In these cases, optimization methods are limited to searching for the most profitable offers on the market for similar services. Another part of the costs can be made dependent on cash flow through KPIs, thereby eliminating unproductive expenses.

Reduction of interest payable

Most of all, the amount of interest paid for the use of borrowed funds depends on the financial policy pursued by the enterprise. Despite the fact that the cost of attracted resources in most cases will be close to the market average, an enterprise can influence the volume of borrowed funds and the timing of attraction. These two factors determine the final efficiency of using external financing. The path to optimizing this type of cost lies through reducing the duration of the financial cycle.

The financial cycle is the process of transferring an organization's funds first into raw materials, materials or goods for resale, and then the reverse process of converting finished products into money in current accounts and at the cash desk. The starting point of the financial cycle is payment to the supplier, and the final point is receiving payment from the buyer. The duration of the cycle - the time elapsed from the beginning of the cycle to its completion - is directly related to the need for borrowed funds. The longer the financial cycle, the greater the dependence of the enterprise on external sources of financing. Therefore, in general, reducing the duration of the financial cycle is a goal, the achievement of which will lead not only to optimizing the amount of fees for using loans, but also to increasing the efficiency of the business as a whole.

Summary

In conclusion, I would like to draw attention to the fact that significant and sustainable cost optimization can only occur as a result of optimizing business processes. It is unlikely that you will be able to significantly reduce any particular type of expense without changing anything else around you. This almost always requires a change in all processes associated with this function. But if successful, there is an additional increase in efficiency due to the elimination of unnecessary functions, reducing the need for resources and their redistribution. A further development of this model will be the transition to business process management through cost management.