[tab name=’Guidelines’]

Guidelines : Cutting/Watching/Justifying

Cutting, Watching or Justifying Expenses

Guidelines and Alternate Phrases

• State the expense of concern immediately. Even in a persuasive letter, your readers still need to know to what conclusion you intend to lead them. Without knowing the bottom-line message, they feel manipulated. Another inherent danger in building your case before making your request is your readers may examine your evidence and arrive at an altogether different conclusion. By giving your statement of “wants” first, you can guide their thinking toward your own conclusion.
• Include a why. Readers need motivation for both belt-tightening and spending. Include both obvious and not-so-obvious reasons for your request.
• Of course, such uncontrolled expenses reflect an attitude of carelessness to those we supervise.
• Such extravagance is not the kind of image we want to project to our customers. Our niche has always been the highest quality at the lowest profit margin.
• Such expenses may drastically affect our available funds for bonuses and raises at year’s end.
• As we are all happily aware, sales are going up. But if expenses rise to the same point, or even higher, what have we gained?
• Don’t base your request to cut or watch expenses on personal observation alone. You need facts to back up what you say; otherwise, the reader will likely argue that you have latched onto the “exceptional.” If you don’t want to gather the facts yourself, then ask the responsible person (perhaps your reader) to do so. Without authoritative data, the issue remains vague.
• Translate vague costs to specific, understandable dollars.
• When ordering a “cut,” offer alternatives. Suggest ways to accomplish the same activities with fewer dollars. Or ask for such suggestions from the readers. Pinpoint your priorities for spending.
• When justifying expenses, anticipate alternative solutions and address them. What limitations do these other options have?
• Be accurate in your predictions and figures. Avoid sounding like you’re going into bankruptcy if the postage meter isn’t replaced, but do make readers aware of the seriousness and specific repercussions of the situation.
• Don’t reprimand by way of a cutting-expenses letter sent to more than one reader. In pointing out one individual’s weakness, communicate privately, not with a distribution list.
• Don’t sound abrasive. In a “problem” statement, calling someone by name in direct address (“Wayne, this is a function of your department.”), you have made the issue a personal attack. Including yourself in a we-need-to-cut-or-watch-expenses statement makes a much more palatable suggestion and makes your reader feel that thrift is a team effort.
• I have every confidence that you, as directors, can pull us out of this unpleasant predicament.
• I’ll appreciate any suggestions you can give me on how you plan to cut expenses in your division during the next quarter.
• I know you won’t let me down.
• Come on, we can do it. Keep one hand on the wheel and the other on your wallet.

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[tab name=’Example 1′]

Example 1: Sample Letter for Cutting/Watching/Justifying expenses

Memorandum

TO:

FROM:

DATE:

SUBJECT: Reducing Mailing and Printing Costs

Wayne, what can we do to reduce our mailing and printing costs? Down in the supply room, I noticed boxes and boxes of Bylines and last month’s financial statements; I assume these were leftover copies.

I’d like you to do some kind of study of our actual printing and mailing costs and then see what we might do to control these expenditures. Here are some suggestions for your consideration:

• Manual audit of mailouts from each branch
• Duplications from corporate and branches
• Combining financial statements and Bylines into one publication
• Cheaper mailing rates
• Survey of distribution problems

We need to control the checkbook and watch pennies to make profits in these difficult times. Your suggestions for printing and mailing controls will ensure that we do that. Thanks for your help; I’ll look forward to your conclusions.
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[tab name=’Example 2′]

Example 2: Example Letter of Cutting expenses

Company Name or Letterhead
Address
City, State Zip

Date

Addressee
Address
City, State Zip

Dear Ms. Myres:

In developing my portion of next year’s budget, I came across an alarming situation–our increase in long-distance telephone expenses. The increase for all three buildings in this past year has been more than $6,000 monthly. It seems we have totally lost control! We have no way to allocate long-distance costs to any one area, and we have no management reports whatever to aid us in gaining the control we now need or to plan for the future.

Here is a brief outline of the problems as I see them:

• Telephone company increases in long-distance charges
• No method to allocate cost of calls to individuals or departments
• No monthly reports to managers
• The possibility that we’ve outgrown the present system

Can you put in some time on this situation and get back to me in a month with your recommendations for lowering these telephone expenses? My priorities are rather straightforward–excellent service that allows for company growth with the lowest possible costs. Within these guidelines, I’m open to just about anything you can suggest.

Thanks,
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[tab name=’Example 3′]

Example 3: Business Letter for Cutting/Watching/Justifying expenses

Memorandum

TO:

FROM:

DATE:

SUBJECT: Justification for an Additional Tape Librarian

Unless we hire another librarian immediately, the library will become non-functional. The burden on one individual to monitor, maintain, and perform tape-librarian functions has exceeded our expectations. Although temporary help has been used from time to time, errors are on the increase due to lack of training and rushed work of all concerned.

The ROT-WPF library currently houses 22,000 tapes, and that number increases daily. The tape-evaluator operator may assist the librarian from time to time, but this extra responsibility detracts from our evaluation process. Temporary help leaves us vulnerable to numerous costly mistakes; one week’s audit revealed we had approximately 16 such errors involving 22 lost hours to locate and correct the mistakes.

Why did we not budget for this manpower need? First, we did not expect the rapid business growth or the expansion on the TN420. Our database has increased 43 percent in the past year. Second, we anticipated the removal of our RW500; but, as the situation now stands, we plan either to convert or merge this database into the TN420.

I propose this new librarian work a delayed first shift to allow maximum overlapping coverage for six hours of the eight-hour shift.

Clearly, this approximate $900 labor cost per month is insignificant compared to revenue losses due to errors or delays.
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[tab name=’Example 4′]

Example 4: Cutting/Watching/Justifying Letter

Memorandum

TO:

FROM:

DATE:

SUBJECT: Mailing Costs for Promotional Advertising Campaign

In reviewing our July Expenditure report, we have discovered that our mailing costs for advertising rose nearly 25 percent as compared to the month of June. However, we have seen no corresponding rise in sales of the three items that were placed in promotional advertising.

We believe that the ad campaign the advertising department has generated is an excellent one. However, we will have to either see an increase in sales or be provided with carefully researched demographics that project solid gains in order for us to allow the campaign to continue on the same scale.

We are assigning Ed Turner from accounting to work with Ellis Mackey in marketing and Darrell Kent in advertising. These individuals’ mission will be to compile all information related to the Promotional Advertising campaign for presentation at our September board meeting. At that time we will decide whether to continue or terminate the program. If any of the gentlemen mentioned above come to your department requesting information, please make it available to them.
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[tab name=’Example 5′]

Example 5: Letter for Justifying Expenses

Memorandum

TO:

FROM:

DATE:

SUBJECT: Travel Expenses

Due to extreme increases in expenditures, we are having to readjust our travel expense accounts. Effective August 1, we will be placing a cap of $__________ per business trip. We regret the inconveniences this may cause, but our 45 percent increase in expenditures was met by only a 3.2 percent rise in sales.

We understand that from time to time there will be expenses that will go over a given trip’s budget. You are free at all times to request a reimbursement for such emergency expenditures—simply fill out the Overage Form in accounting and your request will be reviewed. If you know of any unusual costs that you will be incurring before you travel, you may go the accounting department and request pre-authorization for additional funds. Please remember, however, that the accounting department is not required to reimburse for costs they cite as unjustified.

If you are unsure what constitutes justified and unjustified over-expenditures on trips, please refer to section 6-18 of your employee handbook.
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[tab name=’Example 6′]

Example 6: Cutting/Watching/Justifying

Memorandum

TO: Office Manager

FROM: Executive Director

DATE:

SUBJECT: Increase In Copier Usage

We have seen a staggering 22 percent increase in expenditures for copier paper and supplies. The puzzling part is that the amount of paperwork being assigned in each department has not increased noticeably. Could you look into the matter for me and investigate the following?

• An increase in copier supplies; please compare pricing over the last three months

• Increased wasteful paper usage in departments;please find out how many times a week departments call for recycle pick-up

• Extensive use of the copier for personal material

See what you can do to discover where the increases of costs has come from. After you have done so, I would appreciate a list of possible solutions to get our copy costs under control.
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