Cost reduction education
How to audit business operating expenses
Take twelve months of spend, categorise it, and test every recurring line against three questions: who depends on it, what outcome it produces, and whether something else already produces that outcome. Then quantify labour separately from purchased costs and rank everything by annual value.
Use twelve months, not one
Annual and quarterly charges disappear in a single-month view, and those are frequently the forgotten ones. Categorise by function — software, subcontractors, fees, supplies, facilities, labour — so patterns become visible.
Test each recurring line
For every repeating cost, name the owner, the outcome and any overlap. Lines that fail two of the three tests almost always shrink.
Keep labour on its own line
Labour waste is usually larger than purchased-cost waste, but it converts to cash differently. Report it as capacity recovery, and never combine it with hard-dollar savings to produce one impressive headline number.
Finish with a ranked shortlist
An audit that ends in a list of observations changes nothing. End with a ranked shortlist of changes, each with an estimated annual value, an implementation cost and an owner.
Apply this to your business
The free Cost Leak Finder walks the same method and returns your Business Cost Leak Score. Hard-dollar savings, revenue recovery, capacity recovery and cost avoidance stay separate, and every figure is labelled ESTIMATED until measured.
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