Sign In
Free Newsletter
Savings strategies involve going beyond balance sheet
Businesses consider some creative options to stay afloat amid recessionCARL SPECHT SAYS his bad habit is just too expensive to keep up in a recession  so heÂs sworn off paper.
ÂIn an economy like this, companies are looking to cut costs wherever they can, said Specht, a tax member of the Secaucus CPA firm Costantino, Specht, Templeton & Co. LLC. ÂWeÂre no different.Â
In reaction to a tepid economy that has slowed sales and driven customers to drag out bill payments, companies are cutting office supplies and slashing headcounts to conserve cash, according to CPAs.
ÂWe took a hard look at our expenses, and realized that office supplies could be cut significantly by eliminating paper wherever possible, Specht said. ÂNow, all of our work is maintained electronically, and whenever we get hard-copy documents, we scan them into the computer. Besides the direct savings on the cost of paper, weÂre also saving on storage space.Â
This year, as in others, companies are reviewing their budgets, Specht said, but now, theyÂre demanding even more accountability.
ÂManagers are looking for spending patterns  like things like expense reports, he said. ÂThey want to see, for example, what their salespeople are spending, and whether the expenditures are justified.Â
Besides freezing or reducing salaries and cutting headcount, firms are also trying to speed their bill-collection cycle, said Thomas McCabe, director of accounting at Prestige Wealth Accounting Group, in Pennington.
ÂOne suggestion is to ensure theyÂre sending out invoices in a timely manner, McCabe said. ÂAnother is to offer more payment options, like credit cards.Â
Besides making transactions more convenient for clients, a credit card transaction can slash collection time for a business and protect it against bounced checks, he added.
ÂFinally, think about cutting loose deadbeat clients, McCabe said. ÂSometimes, you need to shrink to grow.Â
Some companies are leveraging their cash in counter-intuitive ways.
ÂA construction materials and supply client recently bought $500,000 of equipment, said Michael LaForge, a member of Livingston CPA firm Sobel & Co. LLC . ÂNormally the company would pay cash, but in todayÂs relatively low-interest-rates environment, it made sense to conserve cash and finance the purchase. This way, the company doesnÂt draw down its cash reserves.Â
As companies rush to cut costs, they need to avoid taking steps that could hinder their recovery when the economy bounces back, one CPA said.
ÂOne company ruled that employees who went out with a client would have to account for the time as a personal day, said Michael Wolansky, president of Demetrius & Co. LLC, a Wayne CPA firm. ÂThatÂs counter-productive, since it discourages their sales force from establishing good client relations.Â
Wolansky said his firm is cutting costs by negotiating with its vendors and contractors.
ÂWe tell them that we value their business, he said. ÂBut if they want to keep working with us, they need to offer competitive deals.Â
E-mail to [email protected]
r
