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How can we reduce our administrative costs to increase our cash flow?

We are doing a simulation of our business but we see that although we generate revenue our administrative expenses are high, so our flow it’s negative. How can we reduce these administrative costs to increase cash flow?

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4 answers

Hi Abigail. The potential areas where you can save money will depend, in some degree, on the nature of your business. But, in general, you may want to evaluate, reduce and control expenses related to items such as office's rental / leasing / subleasing / ownership, utilities, travel, gasoline, paper, maintenance, repairs, tools, supplies, membership subscriptions, on-site vs. outsourcing, presence-based vs. telecommute, manual operations vs. automation, training, social events, inventory, meetings, and so on. Once the changes are implemented is important to obtain full collaboration from personnel (try to share incentives). And management team should lead by example. Wishing you well.

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Can you provide more information about which specific expense line items you consider 'administrative'? The type and nature of the cost will drive the strategy to put in place to optimize or reduce the burden on your cash flow.

Report Robin's answer

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Cooperative purchasing may be a good option to consider to reduce some expense categories. There are a number of contracting/sourcing co-ops that enable smaller companies to aggregate their buying power which results in lower cost for each individual member. Additionally, moving to remote work or co-working office space may also be worth exploring to reduce rent/utility/overhead costs.

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Stratify all your costs (largest to least). Determine the value of each of the costs to the business and rank order them from Have to Have, to Nice to Have, but not critical. For the Have to Haves - compare your cost to other like businesses cost for same - use Internet to do comparisons. Also use internet to find other companies that can provide the service that you are doing and see if it's cheaper to outsource (outsourcing not only gives flexibility in services, but potentially able to reduce headcount within your business or streamline). Once you've compared, begin the cutting process (understanding that it will be rocky at first). No one can do what you do the WAY THAT YOU DO IT - so be willing to learn and look at end results, not just the process to getting to the end result. Where it makes sense - outsource. Where it doesn't take a hard look to determine if you really need all of the administrative functions are do you have them because that's what they do in other businesses. Remember at the end of the day, you are a trail blazer and you will always find ways to do things differently. Just because others are doing it, doesn't mean you have to. Determine areas you can't skimp/reduce on - sound accounting, inventory control, payroll, etc.

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