Cutting costs in tough times

Companies work with advisers to consolidate, restructure balance sheetsA WEAK ECONOMY is whipsawing businesses, driving entrepreneurs and their advisers to scrutinize their operations for cost savings, according to experts. Now more than ever, they add, company owners and their CPAs should sit down and review their activities from top to bottom.

“A recession spurs businesses to look even more closely at operating in a lean manner,” said Bill McNamara, a shareholder in the Toms River office of CPA firm Cowan, Gunteski & Co. P.A. “We’re seeing small- and medium-sized business owners paying more attention to invoicing and other cash-flow issues.”

The profits that often accompany a strong economy can hide weaknesses in a company, McNamara said, “but in a recession, business owners are eager to tune up their operations.”

Executives at Bel-Ray Inc. saw it that way when they attended a “lean office” workshop conducted by the New Jersey Manufacturing Extension Program Inc. The Morris Plains-based not-for-profit organization helps small- and mid-sized businesses shave costs and improve efficiencies.

The course “was an eye-opener,” said Lauren Volk, director of finance at Bel-Ray, a Wall-based manufacturer of specialty lubricants. “It led us to realize that our accounting and customer service departments actually work closely together, but they were situated at opposite ends of the office space. So we physically restructured the layout to bring them close together, saving time.”

The company also has replaced some internal paper-based records, like purchase orders, with electronic ones. Eventually, Volk said, Bel-Ray wants to move to a paperless billing cycle.

“The initial steps did not require a big capital outlay, but it does make document retrieval a lot more efficient, and opens up a lot of space that was formerly devoted to storage,” Volk said.

“We’re constantly searching for more efficiency, but it’s even more important in a rough economy.”

Even if companies don’t formally ask for a review, CPAs like Vinay Navani are scouring their profit and loss statements, looking for costs that can be trimmed or even slashed.

“You can compare current period activity to prior periods, and flag any significant variances for investigation,” said Navani, a tax partner with the East Brunswick CPA firm Wilkin & Guttenplan P.C. “We did this for one client, a medical doctor who had multiple offices, and found his telecommunication costs were through the roof. To solve it, we recommended a different provider that offered better plans.”

In tough times like this, business owners need to “roll up their sleeves and rediscover what helped them succeed in the first place,” said Ren Cicalese, managing shareholder at Alloy, Silverstein, Shapiro, Adams, Mulford, Cicalese, Wilson & Co. , a Cherry Hill-based CPA firm.

When times are good, companies tend to develop unneeded layers, he said. “Now is the time to review overhead and see if perhaps you’ve got people that aren’t working as diligently as they should be, or if your company can achieve savings by changing its health plan.”

Alloy, Silverstein has been working on cost controls with a South Jersey couple that recently purchased a 102-room hotel in Vineland.

While setting up the company that bought the hotel, “Ren helped us to structure it in a way that maximized tax and other benefits,” said John Scipione. “He also introduced us to bankers and helped us with the state Economic Development Authority, and is helping to walk us through the process of making this hotel energy efficient, with solar installations and other devices. We’re continuing to work with Ren on reviewing costs.

“In today’s business climate, your profit margin is so slim that a business owner can be in the hole without even knowing it.”

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