Gas Prices Causing a Profit Crunch?

7 Tips to Saving Your Bottom Line!

It’s happening and there isn’t much we can do about it when we rely on fuel as a part of our everyday business expenses. We work so hard to monitor our costs and meet our profit goals and then it happens…one of our costs unpredictably goes out of control and we find ourselves in the Profit Crunch. Here are 7 tips that can help you save your bottom line and still achieve your profit goals!

1. Charge a nominal fee for travel. If you have a delivery service with your product, then you can add a nominal fee to help cover the cost of fuel. Another option to this is that you can charge a delivery fee for orders less a minimum that you set. Even services can use this process by implementing a minimum number of hours to help ease the fuel burden. The key is to make it fair and not mark up your costs too much as people are very sensitive about this issue and don’t want to feel that you are taking advantage of them.
2. Plan out your routes and use your phone and email more! If you are like me, I spend my days traveling around to client’s locations and it not only costs me my time but I’m also feeling it in the fuel category! So I try to plan my stops at clients located in certain areas of the city each day so that I’m not driving all over unnecessarily. In addition, I’m making those stops count for more and then doing my follow-ups via phone and email if appropriate. This way I’m still touching the clients, but it is more cost effective for all.
3. Minimize the number of personal hours your employees are spending in company vehicles. While company paid vehicles are always a perk that employees are looking for, it can be one of the most abused perks (especially in this rising fuel market), if the employer is not careful. If you have a narrow profit margin, the increased fuel prices and potential abuse could severely damage your profits. You might even need to go as far as requiring no personal miles on company vehicles.
4. If you have multiple company vehicles, look at which are most cost efficient for gas mileage and try to use those most. Getting into this mindset should be done now. Gas isn’t going down any time soon and you want to start making those cost-saving adjustments now before it is too late. Also, I encourage you to visit with your employees and come up with a fuel-savings plan together. This will increase the likelihood of their buy-in. Everyone is aware of the rising gas prices, so they may have some solutions that you haven’t even thought of.
5. Implement telecommuting, if your business is a good candidate. While this may seem like an odd option because it is not a direct savings for you, it is saving money for your employees and they’ll appreciate that. Solutions could include working a compressed workweek of three 12-hour shifts or it could be that they work 3 days a week in the office/onsite and the other 2 days they work at home. Depending on your product or service, this may be an easy solution to implement. This is an option I use in my business and it allows me to offer it is a perk for my employees with very little cost to me. With options such as www.GoToMyPC.com and call forwarding, telecommuting can be done with a nominal investment. They key to success for this option is making sure it doesn’t detract from your business purpose and that there are very clear guidelines on your expectations for your employees.
6. Implement cost savings plans where you share the savings with your employees. Look at your past few months worth of fuel expenses and then come up with ideas with your employees on where you can save costs and develop that as your goal. Then if you meet or exceed your cost savings goals, share that savings with the employees. It is critical though that you include in these goals your revenue figures as one of the qualifiers. You don’t want to save money on fuel by not selling anything. That defeats the purpose. The goal is to be more efficient at meeting your sales goals and cutting costs while still achieving your revenue goals.
7. Look at outsourcing for delivery vs. running your own trucks. While costs are increasing for everyone, a delivery service may be able to offer a better deal by serving multiple businesses in an area vs. everyone running their own internal delivery system.

Activities such as rising gas prices are something we have little to no control over, but it can have a large impact on our small business profits. So the time to make a plan is now, don’t wait until you can’t recover. Assess the impact that the fuel prices are having on your business and use any of these 7 tips to help your business maintain your profit goals.

Contact: Pam Newman is a Certified Management Accountant, Author, and Certified QuickBooks® ProAdvisor for Financial and Point-of-Sale software. For more information, visit her website at www.quickbooksinformation.com or call 816.304.4398.