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Driving Cash Flow Through Sales, General & Administrative Expenses

Sales, General, and Administrative Expenses (SG&A) is a long-winded way of saying “overhead.”

We have compiled some essential rules of thumb when it comes to using SG&A as a cash flow driver.

Rule #1: Cut carefully

The easiest cuts are usually the ones that have the smallest amount of immediate impact on the company’s success. Unfortunately, these are often the cuts that will do the most long-term damage. It is important to understand the difference between resources that are “fat” and resources that are “muscle.”

Rule #2: Consider capacity

Do you need a bit more muscle? If so, how much? At some point, “step-functions” come into play for nearly every business. For example, you may need to hire a whole person even though you need a half of one (we will resist the temptation for a joke about cutting people in half; that would be in extremely poor taste). Hiring more resources than you need — even muscle — gets expensive until you use up that extra capacity.

Rule #3: Only pay for what you need

Some expenses can be added “as needed” or outsourced. It is possible to outsource or hire “fractional” employees for virtually every aspect of your organization.

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Rule #4: Add carefully

If you think you are ready to add resources, first take a critical look at why you are adding, and the ultimate P&L upside of your potential addition. If there is not a compelling impact to your bottom line, you may want to revisit your logic and save your money for more critical investments.

We are proven muscle builders and fat cutters. Give us a call to see how we can help you follow the rules and get with the (cash) flow.

Related Reading:

Don’t stop here. Be sure to check out some of our other accounting resources.

We have found that the cost savings and efficiencies of working with a company like Owl is more beneficial than hiring our own in-house employee.
With Owl’s in-depth knowledge of our business and an awesome attitude, our business continues to run smoothly.
Owl staff understands not only the financial side of business but is able to coach us on other aspects of business decisions and to help us define alternatives.
The attention to detail, coupled with an understanding of and willingness to dig in to our unique systems and processes has kept us running smoothly.
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