Cleanse expenses, re-shop vendors and move cash into yield accounts

1. The constraint and what graduates it

Item	At 100 to 249 people
The constraint	Everything is still bought at retail, and you are overcharged on all of it; the cash sits unprotected, likely earning very low returns, or, in general, none
To graduate	Renegotiate the rate on everything; shift cash into yield accounts, or into something else that earns a return; add specialized finance roles, especially for tax mitigation; start internal financial audits

The audits and the finance roles around tax are on SOP 172 — Audit internally and review the financial statements each month. This page takes the renegotiated rates and the cash.

2. Run the expense cleanse

It is called the monthly expense cleanse. The appeal given is that whatever it saves drops straight to the bottom line.

The cadence. In one practice, the finance department works to a set cadence, every quarter or so. It looks at every single subscription and asks what can be deleted. The name says monthly, and the cadence is quarterly or so; see section 5.

The question put to each department. Finance goes back to the department behind each subscription and asks: are you sure you are using this, and not only using it, but using it at the level the business currently pays for?

Someone has to push. In one practice, this is singled out as a job the leader runs in person each quarter: asking people on the team whether this or that can go. That is a habit of that practice, and the reason given for it is that people on a team want to keep everything and do not like deleting things. So you need somebody to push out what went unused in the last quarter. Waste, it is said, just happens a lot at this size.

People as well as tools. The cleanse is later called a cleansing process for both people and technology. People over-hire, it is said. You need someone who questions the status quo on a regular basis, and that person has to be a little more dominant in personality, more assertive. If the answer is simply "no, we need them all", that person pushes back, asks whether you really do, and asks for the evidence:

• Show me utilization.
• What tickets are coming in?
• Do we need this many people?
• Do we need this coverage?

A reminder, as it is called. A well-known figure came into a platform and laid off 80% of the company. The view given is that the company was fine: whatever the news coverage says, from on the platform it is seen to keep growing. That reading is a personal one.

Letting a person go is on SOP 153 — Fire without surprise and plan who covers the work.

3. Re-shop every vendor, and the service you get

Once the cleanse is running for people and technology, the next thought is that you are an enterprise business now. You should be getting enterprise pricing, and volume discounts.

Re-shop everything. Re-shopping literally all of it is highly recommended: go to every vendor you buy from. The opening offered runs along these lines: our volume has grown five times since we first came to you, and we are still paying retail.

How it is shopped, in one practice. Go and get three other vendors. Show your vendor what their rates are, and what they are willing to pay you to switch to them. You would be amazed, it is said, at what vendors will do to keep your business.

Renegotiate the service level too. When you re-shop, renegotiate the level of service as well. The business has become much bigger, so a much higher tier of service makes sense. The service you had a hundred people ago is not the level to settle for. You probably need more hands-on service: the phone number of your rep, and not having to go into the bank to do everything. There is a lot you can get, and use as leverage, at this point.

Your bank. As the point is added, by now you should have business banking, with a bank specific to your account: you are making the bank a lot of money.

Keeping core vendors as partners by paying them on time is on SOP 154 — Get granular financial data, section 5. Other ways to cut what delivery costs, prepaying vendors for a discount among them, are on SOP 127, the page on cutting delivery cost.

4. Move idle cash into yield accounts

The cash should be in yield accounts. At least today, given the current market, that money should be making you something. The percentage yield will change, it is said, for anyone reading this in the future.

Why size matters. The example given runs as follows:

Cash sitting in the account	Earning 5% on it
50 grand or 100 grand in a checking account	Whether it earns 5% or not makes no huge difference
$10 million, sitting there just for normal business functions	500 grand a year, which is material

Making sure the money sits in the accounts that pay higher yields is called an easy, one-move thing that simply makes you far more money.

5. What this page does not decide for you

• How often the cleanse runs. Its name says monthly. The cadence given is every quarter or so, and in one practice it is led each quarter. This page does not settle which reading is right.
• Which accounts count as yield accounts. Not established on this page.

6. What this page does not cover

Internal audits, the monthly review of the financial statements and tax mitigation are on SOP 172. Investment products and banking rules are not covered on this page.