Monday, July 02, 2012

Most companies, especially small and medium sizes have focused on cost cutting to improve or maintain their profits. These costs are usually split between variable and fixed costs – the first varies directly with revenues and the second stays the same , no matter what the revenue is, increasing only in steps as the business scales up.
Whether it is variable or fixed, companies usually look at pricing reductions to achieve cost saving. This means “price shopping” periodically and beating down existing or new vendors. What can and should be done is also a “relationship” review. Look at your revenues and size and work out each main category of cost as a percentage of revenue. This will reveal, in spite of cost reductions that there are certain costs that are top heavy; in relation to your revenue you are incurring too high a cost in this category. This will lead you to investigate usage of this resource ( that is represented by this cost) . An example could be rent – even with a price reduction, if your rent represents 20% of revenues, then you may be renting too much space. The purpose here is to understand that utilization of resources that incur cost needs to be revisited. Most all costs can be scrutinsed in this manner and the percentages aligned with revenues to be acceptable. Running your P&L with percentages on each cost category is the place to start.

Mohamed Noohu

Mohamed Noohu

MSNCFO founder Mohamed Noohu has over 25 years of varied work experience as Controller, CFO, and business owner. His background reflects diverse industries, company sizes and stages of growth, including very large, well-established multi-nationals in the oil services, logistics, transportation and Insurance industries, mid-sized companies in electronics distribution, and several start-up companies.


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MSNCFO provides many opportunities to intermediate accounting students. Throughout my 3.5 years of working with the company, I was able to improve my existing skills,

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