Controlling Expenses via Budgeting

Many managers make the mistake of tracking expenses in a manner that negates any responsbility for managing them.

One example is office supplies. Suppose your annual expenses are $12,000. Would you rather A) Divide the expense among six departments or B) Assign one person responsibility for managing this expense.

The correct answer is B. Why? People are more likely to actively manage large expenses ($12,000) than smaller ones ($2,000).

As a general rule you should not have a General Ledger Account for any expense with a project yearly expense of less than $1000.

Controlling Freight Costs

Book publishing software that compares the amount charged for shipping to the actual shipping cost can help save you money.

At one client using an outside fulfillment (pick, pack and ship) service we were able to quickly write a report that showed invoices where the actual freight charge was greater than the invoiced amount. By segmenting this list we found that promotional copies were being mailed via UPS for $6 to $8 a book.

By switching the shipping method for promotional copies to media mail; a service of the USPS (United States Post Office) , they cut their cost per shipment by 60% and saved $24,000 a year.

How was this possible? The fulfillment service sent their software a file with the invoice number, shipping date, tracking number and actual freight cost for each days' shipments. If they were processing the fulfillment in house they would have their internal shipping manifest system (UPS Worldship for example) send back similar information to their internal information system.