Learn to Cut Costs, Grow Revenue, and Offset the Increase of Government-Mandated Expenses.
Recently, minimum wage increases in various states have shown signs of improving the economy. However, when you’re a small business facing large bills, disgruntled employees, and a whole slew of other issues, small changes in your bottom line can mean the difference between your existence and your financial demise.
According to the Washington Post, 11 states are set to increase their minimum wage to more than $9 an hour by 2018. So how will minimum wage increases affect your bottom line, and how can you proactively take steps to hedge unnecessary expenses?
At $9, from the federally mandated minimum wage of $7.25, you are looking at a $1.75 / hour increase. That’s $3500 a week for every 50 employees, not including overtime. The states that will be increasing their wages in the coming future are: California, Connecticut, Delaware, DC, Hawaii, Maryland, Massachusetts, Michigan, Minnesota, New York, Vermont, and West Virginia, and most of them have already started slowly implementing increases this year. Some of these sates already have minimum wages set higher than the federal mandate, and are expected to reach well over $10 per hour by 2018.
Tips to Offset Increased Costs
The first thing to do is take an inventory of all your products and perform an internal audit to determine where losses are coming from. Once you have this information, you can start to implement a loss-prevention program and cut products that are costing you more than they are worth.
Let’s say you sell a product for $7. The raw cost of obtaining or producing that product is about $4 per unit. The amount of time your employees spend dealing with that product also averages a net cost of $4. Therefore, for every one of those products you sell, you’re actually losing a dollar.
It is possible that you may find a better way to deal with the product, such as by raising the price or cutting labor costs. But if there is no viable solution, ditch the product altogether — your employees can be used for much more important things. Once the product is removed, you may even find that you have more employees than is needed. These employees can be trimmed, making your company more efficient and cost-effective.
The second thing to do is track how your employees are spending their time while on the clock. How much time is spent on each task, and how much downtime is there between tasks? By identifying the lulls in productivity, as well as peak production hours, you can implement incentives and techniques that will recharge your staff and boost your production. Just be sure to take into account breaks and overtime.
You will likely discover that a good percentage of your loss comes from the basic tracking of time and attendance. For instance, are your employees punching in and out correctly? Are coworkers punching them in when they are running late? Are they taking longer breaks than they are accounting for? Is your accounting system properly tracking all of the punch-ins and punch-outs of the day?
According to the American Payroll Association, businesses see a human calculation error up to 8% per year, and that’s not including buddy punching (i.e., time theft), which averages 270 minutes per week per employee. Even at a conservative rate of error of 2% and 100 minutes lost to buddy punching, you are looking at a loss of $616 a week, which for a staff of 50 employees is more than $32,000 a year!
By taking inventory and tracking your employees’ time, you can find creative ways of using this knowledge to save or make money. If you take into account how much more you’re going to have to pay your employee in overtime to finish their tasks, you can offer bonuses when production goals are met at a lower cost than what overtime pay would have been. Employees will appreciate that.
SkyWire offers a revolutionary time and attendance system that uses biometric scanning to ensure that there is no time loss and that your employees meet all of the federal standards for brakes and overtime. Best of all, it integrates with most accounting software, making integration into your existing system seamless and simple. Click the here to find out more.
Rising expenses in the business world are natural — but money lost to human error and inefficient product management is not. I urge you to take a deep look into the expenses and logistics of your business find ways to cut losses and increase productivity — it’s the only way to survive.