What is sure is that, in the present return to the realities of paying bills and repairing balance sheets, public shareholders, private owners and even creditors are going to be watching carefully for ways that businesses can cut costs while not harming sales. This is, it should be said, as much an art form as a management science. Too often in business downturns, firms cut advertising and marketing budgets, further reducing sales. It's far better to aim for costs that are unrelated to sales or that are effectively post-sale items on a firm' s income statement. According to Debby Stern, a partner in KPMG's owner-managed business unit in Toronto, a list of leading cost controls has to begin with inventory management.
Firms have to sell damaged or obsolete inventory to realize cash.
Then look at your list of assets to determine which ones are dead and which are productive. A firm can sell dead assets like unused real estate to realize cash for better use in the business. Firms also should examine what makes scrap and how scrap production affects various product lines. Reduced scrap output should lead to more efficient production, she notes. Next, firms should look at their suppliers to see if renegotiation or use of other suppliers may generate costs reductions on inputs.