Written by Andrew Trim

When you pay a bill, remember that money is about to leave your bank account. Before paying, always ask, “What is this expense for?” If the expense isn't directly contributing to profit, chances are that you should tear it up.

Rent, phone, postage, insurance, stationery and electricity are must-have items. Little scrutinisation is necessary. Other expenses such as sign erection, window cleaning, advertising, leases, entertainment and gadgets should be viewed with suspicion and traced back to see if they truly lead to income and profit.

Most agency owners would love to have an extra sale a month to squirrel away into a profit account, just for themselves. If you examine your expenses closely you might just get the equivalent income by slashing unnecessary expenses.

When things are going well, leaders tend to relate expenses to gross commissions.  "This will only cost me half a sale a month!" can be a very expensive comparison to make. For every dollar you spend, you have to earn between $3 (for a very well-managed agency) and $5 in gross income.

So that $1,000 monthly lease payment requires you to earn at least $3,000 just to cover it. And tax hasn’t even been considered in this equation. Too many expenses will send you broke.

Try asking yourself this question before spending money: “Would I spend this money if I hadn't made a sale this month?” Remember, “Umm”, means “No!”. Ask the question before you incur the cost and you may not have to pay the bill later.

Needless spending can be the death of a business. In The Smartre Business System, we advise managers to use the principle of Pretending to Be Poor. It’s good advice. Instead of spending money like there is no tomorrow, pretending to be poor now may mean you never have to worry about money in your golden years. For some, this principle of delayed gratification isn’t fast enough, so they try and lease themselves to a wealthy lifestyle.

There are many ways to cut costs by at least 10 percent without even feeling it.  When was the last time you went through your expenses, item by item, to cut those expenses that do not link directly to profit?

If you haven’t done this exercise in the past twelve months, try it. With some of the money saved, you can come along to our next seminar and pick up some more great ideas on how to improve your income and your profit.