More Accounting Tomorrow Posts

Not So Penny-wise

May 10, 2009

Firms that want to cut costs must be careful not to trim too much in the name of short-term savings.

I moderated a panel earlier this month about how nonprofits can survive the economy. One of the categories was about managing budgets and how to determine what to cut and what to keep.

One of the panelists relayed a sad and senseless story: He hired a fundraiser whose salary was $40,000 and who brought in $400,000 his first year of employment. The nonprofit he worked for still experienced some financial hardships because of the economy, however, so they chose to lay him off to “save money.” This guy was bringing in $10 for every dollar the nonprofit invested in him but all the decision-makers saw him as was an expendable line item.

On the other hand, the panelists said, having to make cuts can also introduce opportunities to eliminate staff or other expenses companies tend to hold on to in greener times even when they shouldn’t, either for emotional or political reasons.

Several firms I spoke with told me they had the best tax season ever this year. But now that it’s over, some will still have to make cuts.

Those that are making those tough decisions need to take a hard look at what those staffers really bring to the table before sending them to the chopping block.

If they don’t, firm owners may find themselves weighed down with the pocket change that remains.

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