Controlling Expenses To Control Cash Flow

Expenses and sales have an intimate relationship. Knowing how your costs move will help you control your cash flow and project your future.

Fixed costs remain relatively constant in the short term. Gradually as sales increase to higher levels, your fixed costs will grow.

As your business grows you may have to acquire more space.

This is true of vehicle ownership, insurance, employee benefits and telephone line charges.

Some control methods include:

▪ Renting temporary space on a short lease.

▪ Leasing rather than buying additional vehicles.

▪ Outsourcing office work.

When sales increase, variable expenses per unit remain the same, but total costs rise with sales. Some control strategies:

▪ Efficient manufacturing to reduce material or labour costs.

▪ Proper scheduling to reduce expensive rush delivery charges.

Maintain your profits by promptly passing cost increases and decreases to your buyers.

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