When allocating costs, one should also consider the impact on the recipient of the allocation.

It is best to allocate only those costs over which a recipient has direct control, since the recipient can take direct action to control the cost. Another way to control G&A costs is to create standards for each activity performed, which can then be used to compare against actual performance, in the same way that labor standards have been used in the manufacturing arena for decades. To create standards for this purpose, use the following steps: y Observe work tasks. This step is fundamental in securing the necessary overall understanding of the problem and in picking those areas of activity that lend themselves to standardization. Select tasks to be standardized. The preliminary review will reveal those routines that are the best candidates for standard creation. Determine the unit of work. There must be a measurement base upon which to set a work standard. Determine the best way to set each standard. Various kinds of time and motion studies can be applied to each work routine, depending on the nature of work. Test each standard. After a standard has been set, it should be tested with varying workloads to determine whether it is a reasonable standard. Apply the standard. This step involves explaining the standard to each employee on whom it will be used, as well as to supervisors. Audit the standard. There should be a regular schedule of reviews for each standard so that there is not a problem with a standard becoming so out of date that it no longer reflects the current level of efficiency of each routine.

y y y y y y

REDUCING G&A EXPENSES The principle issue to remember when trying to cut costs is that one must attack the underlying assumptions that are protecting G&A expenses, rather than trying to make incremental adjustments to those expenses by using greater efficiencies. In many cases, the only way to bring about massive reductions in G&A costs is to completely eliminate some categories of costs. Another general cost reduction concept that applies to nearly all parts of the G&A area is the use of outsourcing. This approach questions the underlying assumption that there is a need for an in-house staff to handle every G&A function. The following list notes a variety of techniques that can be used to reduce costs in specific G&A areas:

Another option is to combine forms. a controller can have a major impact on the amount of cash being funded through debt. which will shrink the amount of interest expense. so that the functions performed by many forms can now be completed with just a few. This can reduce the size of the audit fee. since the hourly rate charged by an external auditor is typically several times the hourly rate paid to employees. Officer salaries. A controller can succeed in reducing the audit expense by changing to a different type of review. There are several ways to reduce it. Instead of a full audit. This is a rare area for a company to exercise much cost control over. It is quite unlikely that a controller can persuade more senior executives to cut their pay. so that a larger proportion of it is tied to profitability or other similar performance-related targets. Storage space. To achieve a large cost reduction. Bad debt expense. but it may be possible to influence the decision to alter the components of officer salaries. rather than a wide range of parts for a wide range of copiers. By paying close attention to accounts receivable collections and inventory usage. which tend to be high. Charitable contributions. Forms expense. Telephone expense. Another option is to standardized on a single type of copier which allows a company to stock a limited number of service and replacement parts for all of them. Reproduction expense. A controller can reduce this expense by conducting a complete review of all forms to see which ones are no longer necessary. Equipment lease expense. A controller can reduce the amount of prime office space devoted to record storage by reviewing the documents and consigning all but the most current ones to cheaper off-site storage facilities. One way is to focus on the expense of the copiers used. and then determine the need for those services. it may be possible to have the auditors conduct a compilation or review. . perhaps because there are so many worthy nonprofit organizations that are in need of a company¶s cash. Interest expense. Many companies purchase all of their office equipment at wide intervals. a controller should first review all existing phone invoices to determine the number and cost of extra phone services.y y y y y y y y y y Audit expense. A controller can have some of the accounting or internal auditing employees assist the external auditors during the annual audit of a company¶s financial records. and obtain leases to pay for them without much thought for the terms of those leases. both of which are less expensive.