The third quarter of this year will end tomorrow. For most businesses that means it will soon be time to start the budgeting process for the new year. An agency’s budgeting process should include a focus on how to cut its expenses, as well as how to increase its revenue in the new year. Both will lead to an increase in the agency’s bottom line, and if expenses are not properly controlled, they will reduce the bottom line impact of an increase in revenue.
Jim Schubert of Southern States Insurance has recently written a good article that discusses 15 steps an agency, or any business for that matter, can take to cut its expenses. Those steps range from low tech (find a business credit card that gives you the best deal on interest rate and rewards program, click here for a comparison site) to high tech (go paperless and move your data storage online). The suggestion I found most interesting was exploring setting up bartering relationships with some of an agency’s vendors. Although as Mr. Schubert points out, an agency cannot legally give its vendors an insurance policy as part of a bartering exchange, there is no prohibition of which I am aware on providing risk management and similar services not related to obtaining an insurance policy to a vendor in exchange for products or services of the vendor. Providing a risk management audit to a vendor as part of such an exchange has the added benefit of potentially leading to the sale of insurance products to mitigate the risks identified as the result of such an audit.
At the very least, all agencies should regularly engage in Mr. Schubert’s last suggested cost saving step. An audit in which possible alternatives to each vendor being used are identified and explored to see if cost savings can be obtained by switching to a new vendor. Such an audit may even result in the elimination of a product or service that is no longer really needed or can be combined with the products or services already being provided by another vendor.