G & A Budgeting

John Matthews, founder and president of Gray Cat Enterprises Inc.

Hurry, hurry, step right up!

It is time to play the game called “G & A Budgeting.” This is the game where heads are counted; budgets are sandbagged and perks are justified. It is an annual ritual that becomes a core tenet in the over all business planning cycle. Yet, whether you are the head of a large department or a sole proprietor, managing your G & A expenses is considered by most, a necessary evil.

First of all, what is this thing called “G & A” anyway? Roughly speaking, these are budgeted dollars outside of the direct expense associated with the creation of products or services. For example, unlike labor dollars to run a store—direct labor—G & A labor dollars are associated with the office personnel. While the operations group is held to a tight P & L at the store level, often the out-of-store G & A budgets are not held to the same scrutiny. In some cases, the profits that are garnered at the store can become eroded at the overall company level with mismanagement of these G & A budgets.

So, it is time to take a close look at G & A as one way of managing to your desired bottom-line. While I am sure that in the last five years, these budgets have tightened considerably due to the economic downtown, they are still prone to having “fluff” in their line item budgets. In order to truly minimize fluff in the budget, one has to take a look at the top seven areas of a G & A budget and ask the following questions.

Out-of-Store Labor:

    •  When was the last time the organized “right-sized” its support staff to add value to the field operations?

    • Is there an opportunity to capitalize some of the labor associated with the company investments?

  •   Have the bonuses and performance merits been in sync with the overall operational profitability?

 Benefits and Insurance:

  •   How frequently are the plan costs of 401Ks, workman’s compensation and insurance reviewed in order to squeeze costs out of the system?

  •   Are the dollars invested for personnel welfare, tuition reimbursement and employee education getting a bang-for-the-buck?

  •   Is there “wiggle room” to reduce or combine offsite management meetings by 10%?  20%?

Travel and Entertainment:

    • Does the company have a strict travel and entertainment policy that company personnel are held to?

    • What types of savings benefits can you gain by negotiating a standard rate at the same hotel chain or rental car company?

    • If each out-of-store employee had to spend their own money on their travel, do you believe that they would schedule their trips smarter?

Office Occupancy

   •  If a goal is to reduce paper costs in the office, how close do you believe the company could get to “paperless” and what savings would be gained?

  •   How closely have you monitored utility costs and contracts including electric, gas, trash, telephone, data and the like to squeeze savings?

 •   Is the current office “right-sized” for the operation at hand or can the company do with less space?

Professional Fees:

•    What is the cost/benefit analysis to outsourcing professional services versus bringing some of those services in house?

  •  What special projects can be commissioned that realize savings on a percentage fee basis?

 • What internal preparation can be completed in advance of calling in a bookkeeper, accountant or attorney in order to offset their fees?

Computer/IT Related Expenses:

• What is the company philosophy on technology – functionality or chase the next shiny object?

• Are the technology advances at the company able to offset headcount increases?

•  How does the technology strategy at the organization derive savings from the interface with the field operations?

Other Expenses:

 •   Have the bank charges been shopped around in order to negotiate the best fee structure?

•  What parameters have been set with regard to memberships, subscriptions and donations?

•   What other expense line items can be looked at and renegotiated to limit additional expense?

I have always been a tremendous believer of bottom-up expense budgeting— meaning that each and every year, the budget is not a carryover, but rather a complete rewrite asking these types of questions.  Over time and unlike the government, which operates in the form of baseline budgeting with automatic increases, your G & A budgets will be tight. Employ this discipline in your organization and improve your P & L without a lot of angst.

John Matthews is the founder and president of Gray Cat Enterprises Inc., a strategic planning and marketing services firm that specializes in helping businesses grow in the restaurant, convenience and general retail industries.  With more than 20 years of senior-level experience in retail and a speaker at retail-group events throughout the U.S., Matthews has recently written two step-by-step manuals, Local Store Marketing Manual for Retailers and Grand Opening Manual for Retailers, which are available at www.graycatenterprises.com.

 

 

 

  • http://www.storeitall.co.uk/ Niamh Allan

    Wow! it was an amazing and fresh game. I never heard about it before.  

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