Consider 2017



Look beyond revenue for profit growth.

Businesses are already looking toward 2017 and
considering what has to be done to keep profits
growing. The Canadian economy is expected to
grow at only 1.5% according to a prediction by the
Conference Board of Canada, which claims that
“…there are plenty of headwinds for Canada’s economic
growth prospects:

  • Investment in the oil and gas sector is still
  • Non-energy investment is lacklustre, so
    Canada may soon face lack of capacity in
  • Canadian consumer spending may not improve
    because incomes aren’t rising sufficiently.
  • Consumers are also stretched thin with debt.
  • Growth prospects for the global economy
    remain poor.
  • U.S. growth this year is also tepid.”

Preparing for 2017

In a slow-growth environment, the best way to maintain
or improve the bottom line is to reduce expenses.
Now is the time to look at year-to-date financial figures
and establish budget goals for the next fiscal year.

Start with zero-based budgeting.

Consider the Following

Start with zero-based budgeting rather than simply
adding a percentage to last year’s expensed figures.
Every item of revenue and expense in the general
ledger is reviewed and the revenue and expense items
are justified with realistic assumptions.

  1. Consider the possibility of having employees work
    from their homes in order to:
    • reduce the cost of lease space
    • reduce travel allowances or reimbursement
    • reduce in-house cost for utilities, telephones,
      taxes, maintenance, and interest
  2. Review the communications system. Determine
    whether a separate facsimile line is necessary.
    Consider using an Internet system that connects to
    each employee’s smart phone rather than using the
    traditional land line.
  3. Consider whether the cloud would reduce computer,
    printing and communication costs and still
    enable employees to find data from one source.
  4. Purge old documents. Much data older than eight
    years can be shredded to free up space.
  5. Review the age and condition of your work vehicles.
    Should you buy a new vehicle or spend money
    on repairs and maintenance?
  6. Can some vehicles be sold to reduce the cost of
    insurance, licences, repairs, maintenance and fuel?
  7. Review the budget for snow removal and ground
    maintenance. Perhaps a flat rate per snow removal
    would be cheaper than a contract. Could ground
    maintenance be performed less frequently?
  8. Review electricity consumption. Can work schedules
    be altered to take advantage of lower, off-peak
    rates? Is it time to update the lighting systems,
    both in the warehouse and in the yard, to higher-
    efficiency lighting?
  9. Consider whether “just in time” delivery is a
    better way to manage inventory. Delivery “only
    as needed” reduces the amount of space devoted
    to storage and frees up working capital by cutting
    inventory costs.
  10. Examine your lines of credit, credit cards, mortgages
    and loans. Perhaps interest costs can be
    reduced, advance payments made, and credit cards
    paid off with lines of credit at lower interest rates.
  11. Determine whether it is necessary to maintain all
    full-time personnel. Could their jobs be done by
    part-time employees or contract workers?
  12. Evaluate employees on performance and return
    on investment. Give raises simply based on productivity,
    quality of work, interaction with clients
    and staff. Have candid interviews with employees
    to obtain feedback on how they view their
  13. Ask all employees how they would improve their
    expertise to increase productivity or reduce costs.
  14. Examine the time taken to collect receivables. If
    your company is not receiving payment within 30
    to 45 days, perhaps it is time to implement a COD
    policy for late payers. If a large part of a delinquent
    client’s bill is, for example, machine parts, then
    perhaps you should have a deposit-for-parts policy
    in place. Otherwise, your business is acting as a
    bank for your clients but it is you who is paying
    your bank or supplier for overdraft or overdue
    accounts payable.
  15. Examine credit card costs. If the cost of collecting
    credit card payments is excessive, consider switching
    to a debit card or e-transfer.
  16. Going paperless can save funds. Establish a system
    of filing for incoming email; items received by
    surface mail should be scanned, filed, and then
    discarded. Use the Internet to transmit information
    related to invoices, payroll and payments.
    Consider e-transfers to clients rather than cheques.
  17. Apply the 80/20 rule. Evaluate your customer base
    and determine the top 20% of your clients. Stratify
    the remaining 80% and determine which are the
    most aggravating to deal with. Stop dealing with
    them and concentrate on the best 20%. Work on
    improving your relationship with those in the
    remaining 80% who show promise.

Budget Like a Start-Up

Ensuring a solid continuous bottom line in times of
economic uncertainty requires owner-managers to veer
away from the traditional budget process. Management
must look at all revenue opportunities and expenditures
as if their business were still in the start-up phase
and justify the figures for the following year on a lineby-
line basis. This will give a better understanding of
how to build opportunities and reduce costs.



The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.


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