Saturday, 11 January 2014

How to Practice Cost Control in Start-Ups

It is very easy to spend money and commit additional costs for a startup. On the other hand it is very difficult to cut back these costs.

One cost that I found running out of control was that of paper used in printers and photocopiers. I realized that we were using using several reams of paper every day and this had started to become a very expensive proposition for the company.

Employees would print anything they wanted on one of several printers spread throughout the office floor and I would often find hundreds of sheets of waste paper lying next to the printer in the morning. Someone would had given a print command and then not bothered to pick up the printout. All these printouts were single side printing on each sheet of paper leading to a doubling of the costs, more so when the paper was wasted in unnecessary printouts.

I found the same practice at the photocopying machine where a lot of documents would be sent for copying and then extra copies would be left lying around the photocopier. I also found employees misusing the photocopier by copying personal books which ran into several hundred pages.

Other than the cost of the paper and the wastage of the paper being environmentally unacceptable, this was also a serious data security lapse both near the printers as well as at the photocopier.

We implemented the following steps immediately to bring our costs under control

·     We earmarked each printer to a group of departments to identify who was wasting paper. Each computer print option was configured to select only the nominated printer and all other options were removed.

·       We configured a default option on every computer to print on both sides of the paper. Now an individual had to select “single side print” if he wanted to send an official letter.

·        We started using refilled printer cartridges for all printers.

·      We used the existing “code” feature in the photocopier and assigned a code to each department. Each department had to enter this code before they could operate the machine and records were available for a scrutiny if necessary.

These were simple but very effective steps to reduce the cost of paper. We saved a lot of money by reducing the wasted paper and we brought in much greater accountability. We took these steps using features that were available in all the software and while achieving cost cuts, we were being environmentally friendly as well.

Another area of paper wastage was at the stores. As a retail company, we would print our customer bills on three inch strips of paper. I found that our standard customer bill was about 15 inches long. A lot of paper was being wasted simply because we were leaving too much space between every line of each bill. These empty spaces were left partly to make the bill “look nicer” and partly because no one had bothered to think of the cost. I did a quick calculation and found that we were using over 5000 kilometers of paper rolls in one year.

We re-engineered the bill, cut out all the blank lines and the unnecessary lined and reduced the length of each bill to 6 inches from the earlier 15 inches (without removing any data that was required to be printed on the bill). We saved over 3000 miles of paper rolls every year.

Cost control in a startup is critical for its success. A culture of cost control, if implemented properly from the beginning will go a long way in building efficiencies in most companies.

The author is the Chairman of Guardian Pharmacies and the author of the bestselling books, The Corner Office and The Buck Stops Here. Twitter: @gargashutosh

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