six steps to help your company grow

Six StepS to Help Your CompanY Grow in CHallenGinG eConomiC timeS

auditing standard no. 5

are you afraid? in his 2004 letter to shareholders of Berkshire

Hathaway, investor Warren Buffet wrote, “Be fearful when

others are greedy and greedy when others are fearful.” today,

many small- and medium-sized business owners are fearful.

they’re afraid they won’t get the credit they need to run their

businesses. they’re afraid their customers won’t buy their

products, and they’re afraid they won’t make their payrolls. as

a result, they focus on survival, not growth.

smart business owners, however, have a different perspective.

they see challenging economic times as opportunities to

streamline expenses, maximize profits, and grow their bottom

lines — in other words to “be greedy,” as Buffet puts it. any

business owner can take six simple steps to make sure his or

her company grows when times are tough and emerge from a

downturn more efficient, more competitive, and more profitable.

Growth vs. Survival

Every business wants to grow and prosper, not just survive. it

may seem like an insurmountable challenge to do that in the

current business environment. Fear causes business owners to

question every expenditure, and many feel comfortable cutting

costs without too much thought as to where or why, in order to

protect their bottom lines. Even businesses that are doing well

are holding on to their cash and not investing. But owners need

to find ways to cut costs while growing their top line — and

their bottom line as well.

it’s up to small- and medium-sized business owners to plan to

thrive, not just survive. Companies can position themselves

to do well in this down cycle, as well as when the economy

recovers. Fortunately, downturns are great times to look at a

business’ health and make sure it’s being run as efficiently and

effectively as possible. When times are good, many business

owners don’t have the time or inclination to do this; good sales

numbers hide internal inefficiencies. But when things are slow,

wringing out inefficiencies and maximizing revenue are keys to

growing and prospering.

six stEps to HElp Your CompanY groW in CHallEnging EConomiC timEs


recessions and economic downturns are good times for

restructuring, as well. if your plan for growth calls for strategic,

targeted reductions in personnel, now is the time to do it, not

when business is booming. First of all, there may not be time

to carefully consider your personnel needs when the emphasis

is on getting orders out the door. second, the public perception

of layoffs is much different in a weak economy than in a period

of expansion. in an expansion, layoffs may be viewed as a

sign that the company is in trouble. But during a recession,

customers and shareholders are more likely to view layoffs as

either an inevitable result of the economic downturn or prudent

cost-cutting measures by a proactive management team.

(But as we shall see, personnel cuts should be done with a

scalpel... and not a chainsaw.)

Six Steps for Success:

planning and thinking ahead — being proactive and not reactive

— are what will separate winners from losers in this recession.

Here are six steps that your business can take to not only

survive this downturn, but actually thrive and grow during it and

long after it’s yesterday’s news.

Step 1: lower employee health care costs.

many employers view health care benefits as a line item that

needs to be cut during an economic downturn. the common

practice is to increase cost-sharing with employees by raising

their deductibles and increasing their co-pay amounts. However,

this is a mistake. providing employees with a competitive

benefits package actually increases the bottom line. this

seems counterintuitive at first. However, it’s important to

remember that in any organization, the most valuable asset is

the employees. not only are employees valuable in terms of the

skills, education, and experiences they bring to the company,

but they’re valuable in the sense that good ones are hard to

train and even harder to come by. a competitive package of

health care benefits can help to retain top employees.



any time an employee leaves, it impacts the company beyond

the immediate loss of his or her contributions. Everyone else’s

productivity decreases because other employees now have to

shoulder that employee’s workload. the people that relied on

the departed employee for information or instruction may see

a decrease in their productivity as well. morale can decline

when top employees leave, which further negatively impacts

productivity. moreover, the costs to the company are great:

lost relationships and missed sales with clients, losses due to

employees who are unfamiliar with the position they’re filling,

and the high cost of finding and training a replacement. some

authors have pegged the cost of losing an employee and

on-boarding a new one at up to $1 million.1

still, it’s easy to risk losing money in the long term when there

are employer insurance premiums to be paid in the near term.

How can you provide quality health insurance benefits now

without emptying the coffers? First, benchmark yourself against

your peers — others in the industry with a similarly sized work-

force. to be competitive, your plan needn’t be in the top one

percent of all employers. Being in the top 25 percent will allow

you to cut costs while still providing quality coverage. it will also

let your employees know that you’ve researched what’s out

there and where your offerings stack up. also, know the compa-

nies with which you compete for your top employees, and make

sure your health plan is in the same ballpark as theirs.

another new trend is creating a culture of health and

implementing value-based benefits. When a company creates

a culture of health, it makes healthy living and active lifestyles

a part of the company’s day-to-day culture. Employees are

encouraged through a variety of means, monetary and

otherwise, to make better choices about their lifestyles

and their health care. For example, there may be company-

sponsored sports teams, walking trails on the corporate

campus, or weight-loss contests. the thinking is simply that

healthy employees are less expensive to insure, show up to

work more often, show up sick less often, and are overall more


1 nathan, s. (2008). Help execs grip the flying trapeze. Business Insurance Industry Focus, January 2008. retrieved dec. 11, 2008 from http://www.businessinsurance.com/

cgi-bin/industryFocus.pl?articleid=23874&issuedate=2008-01-20


productive. as Capital one’s chief Hr officer matt schuyler

said, “reducing the need for health-care services in the first

place by improving associate health—creating a “culture of

health” within the organization—appears to be an effective

strategy for reducing costs over the long term.”2

Presenteeism, or sick employees coming to work, is a

major drain on resources. a study by advancepCs, a health

management company, showed that of the quarter-trillion

dollars in losses u.s. businesses incur every year due to

illness, nearly three-fourths come from presenteeism.3 a

culture of health can reduce employee illness and help to

shorten recovery time, saving businesses literally billions of

dollars in lost productivity.

similarly, value-based benefits encourage employees to care

for and prevent serious and chronic medical conditions that

would keep them from being as productive as they might be

otherwise. the medications and preventive treatments that add

the most “value” to an employee’s life — those that address

killers like heart disease, cancer, diabetes or depression — are

made the most available by reducing or eliminating deductibles

and co-pays for them. likewise, non-essential or voluntary

procedures and medications are the most expensive. in this

way, employers monetarily incentivize employees to take better

care of themselves, which in turns boosts productivity and the

bottom line for the company.

lastly, don’t ignore generational differences when determining

changes to employee benefits. generation Y or millennial

employees will appreciate and expect exercise programs and

opportunities that are both social and recreational in nature.

generation x will look for family-friendly health plans, while the

Baby Boomers may need access to affordable prescription

medications. By tailoring options to your employee’s

demographic profile, you can not only cut costs and improve

your bottom line, but also produce happier, more productive

employees who boost your top line as well.

2 schuyler, m. (2008). Creating a culture of health: the new corporate mandate. Employment Relations Today, fall 2008, 35-41.

3 stewart, W., matousek, d., & Verdon, C. (2003). The American Productivity Audit and the Campaign for Work and Health. the Center for Work and Health, advance pCs.



Step 2: maximize cash flow.

adequate cash to pay bills and meet payroll is the lifeblood of

any small- to medium-sized business. never get too caught up

in the day-to-day operations of the business or closing sales

to forget to collect your receivables. Having an automated

collection system in place will provide you with a tool that

automatically generates invoices, statements, past due notices,

and other tools you need to collect from your customers.

always negotiate terms with your customers that allow you the

fastest access to your cash. For example, require deposits up

front, and specify that payment is due upon fulfillment of the

order. if you extend payment terms out to 30 days or more,

your customers are getting a free loan from your business.

likewise, try to negotiate terms of 30 to 60 days or more with

your suppliers. that way, you can have the cash in hand from

your customers to pay vendors when their bill is due.

another important way to ensure a steady stream of cash is

avoiding a single-client situation. not only does over-relying

on one customer (such as a local government or major local

manufacturer) threaten the viability of your business, it puts you

over a barrel when it comes to payments as well. simply put,

if your sole customer can’t or won’t pay, you don’t have cash.

seek out multiple customers and spread your business around

if possible.

Step 3: minimize annual taxes.

there are several great ways to minimize your annual business

taxes in the current tax year. First, always make sure you

maximize your deductions. Your accountant can review your

expenditures and help to identify deductions for line items

such as training or business travel. a great way to increase

deductions is to make scheduled donations to charity by year-

end, which has the added impacts of casting your business in a

positive light and benefiting the community.

second, you may be able to expense certain equipment pur-

chases immediately instead of spreading out the deduction



over several years. this can give you a very large deduction all

at once and take a sizable chunk out of your tax bill. if you oper-

ate on a cash basis rather than an accrual basis, as many ser-

vice industries do, then you should consider taking next year’s

deductions now by paying January’s bills prior to year-end.

You can also be creative in your hiring. For example, you do

not have to pay payroll taxes on independent contractors, but

you do for employees. also, payments to contractors can be

structured to your maximum tax savings advantage. However,

know that there are strict rules about who qualifies as a

contractor and who doesn’t. Consult with your accountant or an

attorney to make certain you follow the law.

Step 4: reduce costs for payroll and flex plans.

Flexible health plans are great ways for employers to save

on payroll taxes. Why? they don’t have to pay FiCa taxes on

the money that employees contribute to their flex plans. For

example, suppose an employee contributes $2,000 in a year

to his or her flex account. at a FiCa rate of 7.65 percent, that’s

$153 that the employer doesn’t have to pay.

another key way to lower payroll expenses is simply wise

resource management. overtime, at time-and-a-half worse,

should be kept to a minimum. if possible, allow employees

to take compensatory time or be flexible with their schedules

in lieu of overtime pay — be creative! Examine employees’

workloads at various times of the year. For example, if year-end

is a particularly busy time for a certain group of employees,

while the spring and summer months are slower, determine if

these employees can be asked to do more during these times

of year. do certain employees have “discretionary” times

during their workdays or workweeks when they could take on

additional duties?

it’s also important to reward good time management and

build these recognitions into your corporate culture. recognize

employees who find ways to save time or reduce duplication of

work through low- or no-cost methods (“social” rewards such as

pats on the back, mentions in a newsletter, a gift certificate to

a modestly-priced restaurant, etc.).


a good automated time-keeping system can also be a time

and money saver. this system should be integrated into the

company’s payroll system. Without such a system, work rules

regarding penalties for lateness, allotted times for breaks and

meals, and grace periods are often ignored or circumvented.

With an automated system, work rules are built in. penalties

are applied automatically when employees break work rules,

and it’s reflected in their paychecks. also, consider reducing

grace periods altogether.

lastly, it’s essential to understand how every employee uses

his or her time and to determine if they’re being as efficient

as they can be. the simplest way to do this is to have each

employee keep a log of their activities. in addition, ask

employees what they would like to do if given the chance.

Employees who want to advance in the company will often find

time to help in other areas.

Step 5: improve productivity by utilizing technology.

the #1 technology inefficiency facing businesses is not spam,

viruses, or a lack of funds for new technology purchases.

it is underutilization of the company’s existing technology.

it’s common for companies to invest in technology such as

hardware, networking, or software. However, it’s expensive

and consumes a lot of employee energy and patience just

learning how to use it. after a typical tech install, everyone is

exhausted, the company is out of money, and everyone’s job

has been influenced in some way.

at this point, it’s typical for everyone — employees and

managers — to want to move on and forget about the

changes for a while. many workers don’t want to have to learn

any more or do more than they have to in order to get paid.

additionally, no one has the mental reserves to look back

at what they’ve been through and do a post-implementation

audit. However, that’s just what’s needed. the most important

question to answer is: did you get what you paid for? usually,

technology is implemented in the least painful, quickest way

possible so that you can “get the bills out” and get on with


the business. as a result, the company has missed a

golden opportunity to improve processes, enhance

information integrity, and ultimately benefit decision-making.

By not seizing this opportunity, the company didn’t generate

full value for its investment.

the solution? Without spending another nickel on new

technology, get the maximum value out of what you have.

this requires ongoing leadership from the top and continuous

attention. instead of being satisfied doing what you used to do

on paper, but with a computer, re-engineer the system to achieve

the true benefits of technology — increased speed, reduced size

(think: no more binders or file cabinets), greater mobility, and

reduced costs. this requires a leader who is visionary and takes

risks on new ways to do things, not a “we’ve always done it this

way” stick-in-the-mud. always remember that installing a system

is the beginning of a journey of continual improvement for your

business, not the end destination.

Step 6: reduce property & casualty insurance costs.

When looking at ways to reduce property & casualty insurance

costs, don’t risk a lot for a small amount of premium savings.

analyze your risks and consider the odds. don’t risk more than

you can afford to lose. Consider the basic principals of risk

management, that is:

n What losses can you avoid?

n What losses can you prevent through loss control and

prevention?

n What losses can you afford to retain?

n What losses can you transfer to someone else via contract

or other method?

n What losses do you want to insure against?

When you decide which potential losses you wish to insure,

don’t focus solely on price but look for broad coverage with an

insurance carrier that understands your business or niche and

is financially secure. Work with a trusted agent or broker who

will do periodic reviews of the company’s insurance program,


its claim history, and its loss prevention activities. obtain

evidence of insurance coverage and certificates of insurance

from your vendors, suppliers, and subcontractors so you don’t

get stuck paying a claim that should be paid by someone else.

another way to lower premium costs is to increase deductibles.

You can look at higher deductibles for your auto comprehensive

and collision coverage, property coverage, building and

contents, and a deductible on your general liability. in many

states, businesses can have a small deductible on their

workers compensation plan, ranging from $100 to $25,000,

which creates savings of anywhere from one to 15 percent of

the premium.

Every business owner needs to review his or her claim

frequency and severity and analyze risk retention capabilities.

if you can afford to take more risk, consider loss sensitive

insurance programs, which charge a premium based on the

company’s actual claim history.

review the amount of insurance you have on your building and

contents and be sure they are current with the appropriate

replacement value. this exercise prevents you from over

insuring or under insuring your property. are the values

accurate? With a downturn in the economy, are you reducing

inventories and supplies, and if so, should you lower your

content’s coverage amount? if you have not had appraisals

done on your property recently, now is the time.

at no time should you cut corners on risk management

programs, loss prevention, or claims management processes

and review. if you lose focus on safety initiatives or workplace

safety standards, fail to use protective devices and

equipment, or fail to properly maintain plant and equipment

or production standards, you may see higher future insurance

premium expenses. these will come through higher workers

compensation experience modification factors and higher claim

frequency, which will add to insurance costs. You may also incur

extra hidden costs in terms of lost productivity, lower employee

morale, and loss of reputation and standing.


Finally, if you find that you need to downsize employees, be

sure to have an employment practices liability policy in place.

use the resources of your d&o (directors and officers) or

management liability insurance carrier, including their legal

and human resource experts, to be sure that appropriate

procedures and risk management processes are followed.

this will avoid or mitigate costly wrongful discharge suits

and payments to employees that lose their jobs, as well as

potential fiduciary liability claims.

trusted advisers are Here to Help

in tough times, the tendency may be to avoid talking to service

providers, as they can seem to be trying to sell something, but

the best of them can offer guidance and advice that provide

value and save cost far beyond their fees. and history has

shown that companies that focus on growth when times are

tough are companies that succeed. through all past economic

crises — even the great depression — the companies that

advertised the most, streamlined their operations, strategically

cut costs, and focused on growth over survival consistently

fared better than their competitors. moreover, they continued to

fare better long after the economic downturn had ended.

the choice is clear, and the steps are straightforward for those

who aren’t afraid to take them. smart business owners will

take Franklin roosevelt’s advice and remember that the only

thing their business has to fear is fear itself. Contact your Cpa,

insurance agent, or technology advisor, or if you would like

another perspective, contact CBiZ.

© C

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2009. C

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