| In mid 80’s most of the hospitals in India were government owned and treatment was free of cost. With the advent of Private Medical Care the need for Health Insurance was felt and various Insurance Companies (New India Assurance, National Insurance Company, Oriental Insurance & United Insurance Company) introduced Mediclaim Insurance as a product. |
| According to recent news report health insurance continues to be the fastest growing segment with annual growth rate of 25%. Health Premium has risen to Rs. 8100 crores in 2009-2010. As per the recent reports from various agencies the health sector has the potential to become a Rs. 30000-crore industry by 2015. Estimates of leading Chambers of Commerce also confirm these estimates. |
| On August 15, 2007 Prime Minister had announced Rs 2000 Crores for Health Insurance for poor citizens and the impact of the same is being seen by us in the form of success of RSBY (Rashtriya Swasth Bima Yojna). |
| In 2001 with entry of various private Insurance companies now the customers have choice of buying this insurance from 21 Insurance companies. |
| The Companies, which offer Health or Mediclaim Insurance, are; |
|
| India is the only country where hospitalization insurance policy was being sold as Mediclaim Insurance Policies. The very name gives a feeling to the insured that claim has to be lodged. If motor insurance policy is not sold as motor insurance claim policy and household insurance policy is not sold as household claim policy then why this be named as Mediclaim? |
| In the recent years the trend has emerged that some Insurance companies have started calling this product as Health Insurance. |
| Health Insurance and Mediclaim are two different names for the same product. The change has started coming and now we have started calling it Health Insurance. ICICI Lombard has even named it as Health Insurance Policy. |
| Calling is as Health Insurance is a positive way of looking at this Insurance. It also giving us a feeling that we as a society have started moving from curative medical care to preventive medical care. |
| According to sources in Oriental insurance it is being felt that mindset has started changing over the last couple of years “ The new middle- class of of India aspires for quality healthcare service and doesn’t mind going to expensive hospitals like Apollo or Escorts. There is no reason why healthcare insurance should not be successful with this class. RQVADMDZ9M44   |
Wednesday, August 25, 2010
Health Insurance in India Part I
Wednesday, August 18, 2010
Thinking Clearly About Inflation
The subject of inflation, which occupied the media and the politicians in 2008 until the global financial crisis put an abrupt end to it, has returned to the centre stage of the policy debate. The big difference, however, is that this time around the government has been much calmer.
Previously, the increase in the year-on-year wholesale price index (WPI) to 8% in April 2008 from 4.5% in January 2008 had the government reach out to every conceivable weapon in its arsenal regardless of its suitability for combating inflation. The government’s actions included cuts in import duties, bans on exports, appreciation of the rupee, rise in the cash reserve ratio, suspension of the futures trade, cuts in excise duties, export taxes and threats of price controls.
In the current bout, the WPI inflation has been higher and the reaction of the opposition parties much fiercer. Yet, delightfully, the government has refused to panic. It has firmly carried out the deregulation of petrol prices and, in large part, confined the policy action to monetary instruments.
Most importantly, the government has shown great sensitivity to possible adverse impact of overly aggressive actions against inflation on growth, which is so essential to poverty alleviation. The ruckus in the Lok Sabha notwithstanding, finance minister Pranab Mukherjee has boldly stated that excessive hikes in the interest rates would lead to “no investment, growth or job creation.”
Because inflation can cut both ways even from growth perspective, it often poses a dilemma for the policymaker. Undue tightening of monetary policy to contain inflation may choke off investment and therefore growth. At the same time, excessively high inflation rates, which result in highly negative real interest rates, may be detrimental to savings and hence growth.
They may also make the relative price signals noisy and distort the allocation of investment. Luckily, so far, the annual increases in the WPI of all commodities, shown in the accompanying chart, give us no reason to panic. While inflation began to accelerate in February 2010, taking 2009-10 as a whole, the inflation rate has been just 3.8%.
Admittedly, WPI inflation from February to June 2010 has been in the 10-11% range. But inflation at these rates is scarcely unprecedented. Similar rates had been experienced not just on monthly but annual basis in the first half of the 1990s.
Moreover, the current high rates are largely reflective of low rates in the corresponding months in the previous year. Ultra-low monthly inflation rates of –1 .0 to 3.5% between February and October 2009 left the base over which the inflation rates for the months of February to October 2010 are calculated low. This fact implies that monthly year-on-year inflation rates will remain high until October 2010.
While the measured response of the government to overall inflation is, thus, to be admired, its performance with respect to food-price inflation cannot escape criticism. At 14.7% in 2009-10, wholesale price inflation in food articles has been much higher than the WPI inflation for all commodities. Recent monthly data yield even higher rates: between December 2009 and June 2010, monthly food inflation ranged from 14.6 to 20%.
Previously, the increase in the year-on-year wholesale price index (WPI) to 8% in April 2008 from 4.5% in January 2008 had the government reach out to every conceivable weapon in its arsenal regardless of its suitability for combating inflation. The government’s actions included cuts in import duties, bans on exports, appreciation of the rupee, rise in the cash reserve ratio, suspension of the futures trade, cuts in excise duties, export taxes and threats of price controls.
In the current bout, the WPI inflation has been higher and the reaction of the opposition parties much fiercer. Yet, delightfully, the government has refused to panic. It has firmly carried out the deregulation of petrol prices and, in large part, confined the policy action to monetary instruments.
Most importantly, the government has shown great sensitivity to possible adverse impact of overly aggressive actions against inflation on growth, which is so essential to poverty alleviation. The ruckus in the Lok Sabha notwithstanding, finance minister Pranab Mukherjee has boldly stated that excessive hikes in the interest rates would lead to “no investment, growth or job creation.”
Because inflation can cut both ways even from growth perspective, it often poses a dilemma for the policymaker. Undue tightening of monetary policy to contain inflation may choke off investment and therefore growth. At the same time, excessively high inflation rates, which result in highly negative real interest rates, may be detrimental to savings and hence growth.
They may also make the relative price signals noisy and distort the allocation of investment. Luckily, so far, the annual increases in the WPI of all commodities, shown in the accompanying chart, give us no reason to panic. While inflation began to accelerate in February 2010, taking 2009-10 as a whole, the inflation rate has been just 3.8%.
Admittedly, WPI inflation from February to June 2010 has been in the 10-11% range. But inflation at these rates is scarcely unprecedented. Similar rates had been experienced not just on monthly but annual basis in the first half of the 1990s.
Moreover, the current high rates are largely reflective of low rates in the corresponding months in the previous year. Ultra-low monthly inflation rates of –1 .0 to 3.5% between February and October 2009 left the base over which the inflation rates for the months of February to October 2010 are calculated low. This fact implies that monthly year-on-year inflation rates will remain high until October 2010.
While the measured response of the government to overall inflation is, thus, to be admired, its performance with respect to food-price inflation cannot escape criticism. At 14.7% in 2009-10, wholesale price inflation in food articles has been much higher than the WPI inflation for all commodities. Recent monthly data yield even higher rates: between December 2009 and June 2010, monthly food inflation ranged from 14.6 to 20%.
No doubt, some factors relevant to this inflation such as crop failures, diversion of grain supplies to biofuels, shifts in cultivation patterns away from food crops and rising food grain demand in India and China are beyond the government’s control. Nevertheless, the government’s mismanagement must be held responsible for a significant part of the people’s plight over this inflation.
Thus, consider the scale of resources and network the government deploys in food distribution in the name of helping India’s poor. Nationwide, it runs a staggering 450,000 fair price shops. Its public distribution system (PDS) currently absorbs a gigantic Rs 47,000 crore (approximately $10 billion) in subsidies annually. This is more than Rs 10,000 per year per rural household below the official poverty line.
Above all, the Food Corporation of India (FCI) currently sits on top of a 60.5 million tonnes foodgrain mountain. This supply is sufficient to give every single household in India 21 kilograms of grain every month for a whole year. Sadly, almost 18 million tons or 30% of this stock is stored in the open. If the past experience is any guide, a significant part of the stock will eventually be washed away by rains, eaten by rats and pests or rendered unsuitable for human consumption due to rotting.
If private traders held even a tiny proportion of this stock, they would become subject to prosecution under the Essential Commodities Act, 1955. But the same does not hold true for the government. Even the failure to release the stock when food prices escalate carries no punishment for it. And, of course, corrupt politicians and officials can deliberately slow down the release of the grain to profit private traders at the expense of the public.
Most analysts now agree that the solution to the problem is a highly downsized FCI with its operations limited to regions that private traders will not serve. Other needy households should be provided cash subsidy that leaves them free to choose what they buy, when and from whom. The government must also give up its monopoly on international trade in many food items and rely on custom duties to regulate trade flows. Private traders can handle exports and imports at least as efficiently as the government.
But, alas, the government is moving in the reverse direction. It wants to implement the right to food in a way that gives it the right to distribute more food, further expand the FCI food stocks and put yet more grain in the open for destruction by the rains, rats and pests — all in the name of helping the poor and at the expense of the honest taxpayer!
(The author is a professor at Columbia University)
Thus, consider the scale of resources and network the government deploys in food distribution in the name of helping India’s poor. Nationwide, it runs a staggering 450,000 fair price shops. Its public distribution system (PDS) currently absorbs a gigantic Rs 47,000 crore (approximately $10 billion) in subsidies annually. This is more than Rs 10,000 per year per rural household below the official poverty line.
Above all, the Food Corporation of India (FCI) currently sits on top of a 60.5 million tonnes foodgrain mountain. This supply is sufficient to give every single household in India 21 kilograms of grain every month for a whole year. Sadly, almost 18 million tons or 30% of this stock is stored in the open. If the past experience is any guide, a significant part of the stock will eventually be washed away by rains, eaten by rats and pests or rendered unsuitable for human consumption due to rotting.
If private traders held even a tiny proportion of this stock, they would become subject to prosecution under the Essential Commodities Act, 1955. But the same does not hold true for the government. Even the failure to release the stock when food prices escalate carries no punishment for it. And, of course, corrupt politicians and officials can deliberately slow down the release of the grain to profit private traders at the expense of the public.
Most analysts now agree that the solution to the problem is a highly downsized FCI with its operations limited to regions that private traders will not serve. Other needy households should be provided cash subsidy that leaves them free to choose what they buy, when and from whom. The government must also give up its monopoly on international trade in many food items and rely on custom duties to regulate trade flows. Private traders can handle exports and imports at least as efficiently as the government.
But, alas, the government is moving in the reverse direction. It wants to implement the right to food in a way that gives it the right to distribute more food, further expand the FCI food stocks and put yet more grain in the open for destruction by the rains, rats and pests — all in the name of helping the poor and at the expense of the honest taxpayer!
(The author is a professor at Columbia University)
Source:- Economic Times
Monday, July 19, 2010
Indian Rupees Symbol
Finally Indian Rupees got an International Recognized Symbol.Finance Minister Pranab Mukherjee announced that a new numerical symbol which will be like US Dollar, Euro and Pound for the Indian Rupee.
Reserve Bank Of India already shortlisted five symbols.The final symbol for India Rupee is announced on June 24th 2010.
Reserve Bank Of India already shortlisted five symbols.The final symbol for India Rupee is announced on June 24th 2010.
The shortlisted design apparently plays on the Hindi letter ‘R’ with a .
Saturday, February 27, 2010
Railway Budget 2010-2011 Highlights
On 24th of Feb 2010 Mamata Banerjee had presented Railway Budget in the Indian Parliament House. These are the some highlits for railway Budget 2010.· Railway Minister Mamata Banerjee appeals to business houses to join hands for building partnership with Railways. Presenting Railway Budget for 2010-11, Banerjee says a special task force will be set up for early clearance of projects.
· No fare hike for passengers.
· Railways not to be privatised; It will remain with the government, says Banerjee. While not privatising, Railways have to develop business models for improving earnings, says Banerjee.
· Railways 2020 vision document will contain short, medium and long-term goals. Commitments fulfilled to the maximum. Out of 120 trains announced in last budget, only three remain to be flagged off because of lack of broad-gauge lines, says Banerjee.
· Plans to launch a pilot project for fire detection.The government also plans to construct more underpasses for safety, the minister said while presenting the Railway Budget.
· Railways to start six water bottling plants in places like Ambala, Thiruvananthapuram, Farakka, Amethi and Nasik to provide clean and cheap drinking water to passengers.
·Indian Railways aims to add 25,000 route kilometers by 2020. The railways currently has 64,015 route kilometers, she said.
· India's railways has set up a special task force to clear investment proposals in 100 days
· Indian Railways plans to keep rail freight rates unchanged, Bloomberg-UTV news channel reported, without saying where it got the information.
· Railways to set up mobile e-ticketing centres at hospitals, universities, courts, IITs, IIMs, district headquarters and village panchayats. All 13,000 unmanned level crossings to be manned in the next five years.
· Railway Protection Force to be strengthened through amendments in RPF Act; women's wing to be formed in RPF to ensure security of women. Ex-servicemen to be inducted in RPF. Railways will be the lead partner in the Commonwealth Games in Delhi.
· Railways to set up Rabindra Museum in Howrah and Geetanjali Museum in Bolpur -- both in West Bengal to commemorate Rabindranath Tagore's 125th birth anniversary.
· Railways will provide houses to all its employees in the the next 10 years in collaboration with the Urban Development ministry.
· Railways to enhance contribution to central staff benefit fund. Centre for Railway Research to be set up at IIT-Kharagpur. Chittaranjan Locomotive Works capacity to be augmented from 200 to 275 engines a year.
· Work on Rae Bareli Coach Factory in Uttar Pradesh to start within a year. Wagon Repair Shop to be set up in Badnera near Amravati in Maharashtra.
· Integral Coach Factory in Chennai to be modernised and a new unit to be set up there. If land is available, Railways willing to set up a Diesel Multiple Unit factory in West Bengal.
· No forcible acquisition of land for freight corridor project. One member of each family of land losers to be given employment in the freight corridor as also in the new projects.
· High-speed dedicated passenger corridors to be constructed; National High Speed Rail Authority to be set up.
· Revenue from non-core business of Railways to go up from Rs 150 crore to Rs 1,000 crore. Indian Railways has set a target to transport 944 million tons of goods in the year beginning April 1.
· Railways expects to increase earnings from non core activities. The government aims to increase non core earnings to Rs10 billion rupees from Rs1.5 billion.
· Railways expects to increase earnings from non core activities. The government aims to increase non core earnings to Rs10 billion rupees from Rs1.5 billion.
· Despite slowdown, Railways to exceed freight loading target by eight million tonnes during 2009-10. Freight loading target for 2010-11 fixed at 944 million tonnes, 54 million tonnes more than the current year's revised target. Gross traffic receipt for 2010-11 pegged at Rs94,765 crore.
· Allocation for construction of new lines increased from Rs2848 crore to Rs 4411 crore.
· Rs1,302 crore provided for passenger amenities in the 2010-11 railway budget against Rs 923 crore last year.
· Indian Railway Finance Corporation (IRFC)will borrow 91.2 billion rupees ($1.97 billion) from the market in 2010-11.
· Railways to have master plan for North Eastern region. Special train between India and Bangladesh to be started to commemorate 150th birth anniversary of Rabindranath Tagore.
· 101 additional services to start on Mumbai suburban railways. Survey will be conducted to connect Sealdah and Howrah stations in West Bengal. To commemorate Rabindranath Tagore's 150th birth anniversary, 'Bharat Teertha' trains to connect several pilgrimage centres across the country.
· Indian Railway Finance Corporation will borrow Rs91.2 billion ($1.97 billion) from the market in 2010-11.
Monday, February 22, 2010
Budget Expectation 2010
This Year Finance Minister of India Mr Pranab Mukharji will present the Union Budget in the parliament for the Financial Year 2010-2011 on 26th February 2010. Everyone (Including all types of citizen of India & NRIs) is as eager to know the India Budget 2010 expectations as the final budget itself. After recession or Economic slowdown this is the 1st Union Budget will be going to Present in front of the House.This year Corporate house have more expectation from this budget as well as Common people too.
Corporate House:- Corporate house is waiting for Some stimulus package for the industry.Specially IT & Banking industry most affected from this economic slow down.
Common People:- Common People Expectation have a to control Sky Rocketing of the food prices.
This time Government should more focus on
1. Control on High Inflation Rate
2. Sky Rocketing Food Prices
3. Education Sector
4. Control on Government Expenditure.
5. Tax Rebate for Corporate & Individuals
6. More Focus on Priority Sector (Agriculture & Service) & ETC.
Taxes:
The common men and the corporates are looking for decrease in taxes. The Finance Minister is likely to augment exemption limit of individual taxes to Rs 3 lakh from Rs1.60 lakh for salaried people. Exemption limit for women is expected to be increased from 1.80 lakh to 4 lakh and for senior citizen from Rs 2 lakh to 5 lakh.
However, taxes levied on the perks availed by income earners are expected to be restructured on higher level. This arrangement may satisfy junior employees and senior citizens. But, it may not go well with the people belonging to higher position.
Corporate Tax:
A reduction of 30% is expected in the corporate tax. The expectation is found in line with the introduction of Direct Tax Code (DTC) suggesting a 25% rate. The individual rate was lowered by 30% previous year also.
Capital Gains Tax:
As far as the 2010 India Budget expectation in the area of capital gain tax is concerned, finance minister is unlikely to bring any reform in this category of tax. It is predicted to be included under the Direct Tax Code, to be implemented from April 2011.
Re-fixing of Tax Slabs:
As mentioned earlier, the tax slab for women is expected to be revised to 4 lakh and senior citizens to Rs 5 lakh. However, second and third slabs of tax would see significant change.
The second tax slab is expected to be augmented from the existing Rs 3 lakh to Rs 1 million to be taxed at 20%. The third slab is likely to be increased from Rs 5 lakh to Rs 25 lakh to be taxed at the rate of 30%.
These revisions would act in favor of the reputed advocates as well as the doctors.
Stimulus:
India Budget 2010 speculations suggest that it is not the right time for the government to roll back stimulus packages, despite the fact that GDP growth of the nation in the Q2 (July – September) of the current fiscal stood at 7.9%.
However, experts believe that government would withdraw few of the subsidies from the market. The oil companies were aided with the stimulus package to check loss. Government did not allow the Oil companies to raise product costs of kerosene and diesel, which would have forced the common men to pay more.
As high prices of diesel and petrol would bear adverse effect on the transport rates of food products, the stimulus packages are expected to continue in the oil industry. However, partial withdrawal of the stimulus aid can be expected in this sector to tackle the situation of increasing fiscal deficit.
Agriculture Sector:
According to India Budget 2010 expectations, the agriculture sector would be the highlight of the session. This sector is likely to receive enormous boost from the government. Finance minister's invitation to the farmers for the pre-budget meet is held to be the main reason behind such speculation.
Infrastructure and Social Sector:
Infrastructure industry is also expected to be the focus of the budget results of 2010. Many believe that development in this sector would account for massive growth in GDP. However, it is unlikely to ease monetary policy to better infrastructure. Interest rate cannot be reduced as well.
Other Sectors:
While taking into account the India Budget 2010 expectations of various sectors, it was found that the garment industry of India is looking for considerable cut in interest rates in its exports segment. The garment exporters also want the ministry to remove all the confusion faced in the case of excise as well as custom duties. The sector wants major commercial as well as fiscal relief. Similarly, the Indian tea industry is expecting to get an allocation of more than Rs 130 crore, which was granted in the fiscal year 2009-10.
List are many and expectations are more. In a very few days the government will open their magic box to lure the Indian Common people or they will only for the Corporate House.
Friday, January 15, 2010
Application Supported by Blocked Amount (ASBA)
Application Supported by Blocked Amount (ASBA) refers to an application mechanism for subscribing to initial public offers (IPO). The system, which ensures that the applicant’s money remains in his/her bank account till the shares are allotted, was introduced by SEBI for retail investors in 2008. Now it has been extended to corporate investors and HNIs as well (from January 1, 2010, onwards). The mechanism requires the applicant to give an authorization to block his/her application money in the bank account for subscribing to the IPO. His/her bank account is debited only after the basis of allotment is finalized, or the IPO is withdrawn or fails. In case of rights issue, the application money is debited after the receipt of instructions from the Registrars.
Can one subscribe to all IPOs through ASBA?
No. You can avail of ASBA only to subscribe to book-built public issues and a select few rights issues.
How does one avail of this facility?
Only certain designated banks — Self-Certified Syndicate Banks (SCSB) — can offer this facility to the applicants. A list of these banks and their branches can be accessed from the websites of Sebi, BSE as well as NSE . The applicant can submit the ASBA application to the SCSB with whom he/she is maintaining the account to be blocked (to the extent of the application money) for the purpose. The application can be submitted either by filling up the form or online, by using the Internet banking facility.
Is it compulsory to submit bids through this system?
No. You can choose to opt for the existing process of applying through cheques. However, remember that you cannot avail of both the modes to send in your applications. If you apply through a cheque as well as ASBA, it will be rejected on grounds that it constitutes multiple application.
How does an investor stand to benefit from ASBA?
Despite not being mandatory, it makes sense to opt for ASBA as it scores over the traditional mode of cheque payment in several areas. It enhances the transparency of the share allotment process. Only that amount that is required to make share allotment is debited to the account after the bid is selected for allotment after the basis of allotment is finalised. Therefore, the applicant need not worry about the refund in case he/she is not allotted any share. Moreover, since the money remains in the bank account, he/she does not lose out on the interest that can be earned during the period.
Is an applicant allowed to withdraw ASBA bids?
Yes. During the bidding period, one can approach SCSB, to which he/she had submitted the application and make a withdrawal request, post which, the bank will unblock the amount. After the bid closure period, applicants need to send their withdrawal requests to the Registrars in order to withdraw their bids. Subsequently, the Registrar will ask the SCSB concerned to unblock the application money in the bank account after the finalization of basis of allotment.
Can one subscribe to all IPOs through ASBA?
No. You can avail of ASBA only to subscribe to book-built public issues and a select few rights issues.
How does one avail of this facility?
Only certain designated banks — Self-Certified Syndicate Banks (SCSB) — can offer this facility to the applicants. A list of these banks and their branches can be accessed from the websites of Sebi, BSE as well as NSE . The applicant can submit the ASBA application to the SCSB with whom he/she is maintaining the account to be blocked (to the extent of the application money) for the purpose. The application can be submitted either by filling up the form or online, by using the Internet banking facility.
Is it compulsory to submit bids through this system?
No. You can choose to opt for the existing process of applying through cheques. However, remember that you cannot avail of both the modes to send in your applications. If you apply through a cheque as well as ASBA, it will be rejected on grounds that it constitutes multiple application.
How does an investor stand to benefit from ASBA?
Despite not being mandatory, it makes sense to opt for ASBA as it scores over the traditional mode of cheque payment in several areas. It enhances the transparency of the share allotment process. Only that amount that is required to make share allotment is debited to the account after the bid is selected for allotment after the basis of allotment is finalised. Therefore, the applicant need not worry about the refund in case he/she is not allotted any share. Moreover, since the money remains in the bank account, he/she does not lose out on the interest that can be earned during the period.
Is an applicant allowed to withdraw ASBA bids?
Yes. During the bidding period, one can approach SCSB, to which he/she had submitted the application and make a withdrawal request, post which, the bank will unblock the amount. After the bid closure period, applicants need to send their withdrawal requests to the Registrars in order to withdraw their bids. Subsequently, the Registrar will ask the SCSB concerned to unblock the application money in the bank account after the finalization of basis of allotment.
Monday, July 13, 2009
Six Ways To Cut Business Costs
In times of financial crisis, every business needs to focus on cutting costs, just to stay afloat. Here are the top six ways any business can make reductions in expenditure, without reducing the quality of product or service the business offers its customers.
1 – Reduce Employee Costs
Even if your business is not looking to reduce the number of staff, there are ways of reducing staffing costs during lean business times. Offering overtime to individual employees means you pay that employee up to twice their usual hourly rate.
Rather than pay overtime rates, try re-organising the work rosters and routines to prevent the need for overtime. Perhaps some staff members would prefer to start earlier in the day and others to work later in the afternoon, allowing coverage during all opening hours, without the overtime costs.
Another way of reducing labour costs is to offer staff incentives for reducing their personal days and sick leave taken. Each time a staff member is sick, you need to replace the employee, either by offering another employee overtime, or by working a shift down and reducing productivity. Either way, sick days and personal leave add costs to the company.
Some companies have successfully introduced a reward scheme for employees who do not take any sick days in a year or six-month period. The cost of the reward is minimal compared to the savings made by the company.
2 – Increase Safety
Safety is one area where an increase in initial spending can cut overheads dramatically. Think about all the costs, direct and indirect, involved in an injury in your workplace. These costs include:
* Medical costs;
* Increased insurance costs;
* Loss of productivity while the injured worker is taken care of;
* Resources and time to investigate cause of injury;
* Shift coverage and loss time for injured worker;
* Decrease in employee morale;
* Loss of company’s reputation and public relations costs; and
* In some cases, fines and court costs from government authorities.
Therefore, increasing safety measures and preventing injuries in the first place will cut costs for the business.
3 – Review Procedures and Ensure Efficiency
This is a good time to review all your procedures and work processes to trim the fat. Is your team double handling a particular task? Can you reduce the amount of photocopying and therefore save paper and toner costs? Can you encourage employees to reduce printing by saving electronic files rather than hard copy files? Are there other processes that have become redundant but employees are still spending time completing them? Is there a more efficient method of completing the task?
Look at where you can save someone’s time or resources that the company pays for. Consider saving energy by turning off office lights at night and only having the office cleaned every two days instead of daily. Working more efficiently saves valuable resources.
4 – Reduce Damage to Equipment
Damage to equipment affects business expenditure in two ways. Firstly, damage reduces productivity while the repairs take place. Depending on the importance of the piece of damaged equipment to the overall process, this could put a whole factory floor out of production for some time. Secondly, damage to equipment costs to repair in labour, time and parts.
Ensuring that employees follow processes to prevent damage to equipment can add up to huge cost savings for the company in the long term. Regular checks and maintenance of equipment can replace worn parts before more serious and costly damage occurs.
5 – Shop Around for Suppliers
Make sure you are getting the best deal for essential supplies for your business. You may need to invest some time to shopping around but the cost savings can be enormous.
For example, if you can buy the same quality of paper for the office cheaper by just 50 cents per ream, how much could your business save over a year? If your business purchases just 100 reams of paper in a month, you would save $600 a year. If you made this kind of saving on every product you purchase by switching suppliers, you could add up substantial cost savings over a year.
Obviously, this kind of saving does operate on economies of scale and the larger business will achieve greater savings, but any business can save by switching suppliers to cheaper options.
6 – Staff Incentives for Cost Cutting
Some companies are offering employees a share in the cost savings made over a specific period. This encourages and motivates staff to work more efficiently, reduce injuries, damage and to participate in reducing costs themselves, rather than leaving it all up to the managers.
For example, if your employees can reduce costs by $10,000 a month for six months, your company will save $60,000. If you give even 50 per cent of that back to the employees in staff incentives and bonuses, your business will still save $30,000 in six months. Offering staff a share of 25 or 10 per cent of the cost savings would give your company even more benefits, while still encouraging the staff to reduce expenditure on behalf of the business.
There are many other ways of reducing expenditure by the business. Every cost saving you can make, gives the company more profit and reduces the impact of the global financial crisis. Cutting costs now can ensure the business survives the tough times and is still viable when the economy improves.
Link for this article:- http://www.yourstory.in/resources/finance/1333-six-ways-to-cut-business-costs-
1 – Reduce Employee Costs
Even if your business is not looking to reduce the number of staff, there are ways of reducing staffing costs during lean business times. Offering overtime to individual employees means you pay that employee up to twice their usual hourly rate.
Rather than pay overtime rates, try re-organising the work rosters and routines to prevent the need for overtime. Perhaps some staff members would prefer to start earlier in the day and others to work later in the afternoon, allowing coverage during all opening hours, without the overtime costs.
Another way of reducing labour costs is to offer staff incentives for reducing their personal days and sick leave taken. Each time a staff member is sick, you need to replace the employee, either by offering another employee overtime, or by working a shift down and reducing productivity. Either way, sick days and personal leave add costs to the company.
Some companies have successfully introduced a reward scheme for employees who do not take any sick days in a year or six-month period. The cost of the reward is minimal compared to the savings made by the company.
2 – Increase Safety
Safety is one area where an increase in initial spending can cut overheads dramatically. Think about all the costs, direct and indirect, involved in an injury in your workplace. These costs include:
* Medical costs;
* Increased insurance costs;
* Loss of productivity while the injured worker is taken care of;
* Resources and time to investigate cause of injury;
* Shift coverage and loss time for injured worker;
* Decrease in employee morale;
* Loss of company’s reputation and public relations costs; and
* In some cases, fines and court costs from government authorities.
Therefore, increasing safety measures and preventing injuries in the first place will cut costs for the business.
3 – Review Procedures and Ensure Efficiency
This is a good time to review all your procedures and work processes to trim the fat. Is your team double handling a particular task? Can you reduce the amount of photocopying and therefore save paper and toner costs? Can you encourage employees to reduce printing by saving electronic files rather than hard copy files? Are there other processes that have become redundant but employees are still spending time completing them? Is there a more efficient method of completing the task?
Look at where you can save someone’s time or resources that the company pays for. Consider saving energy by turning off office lights at night and only having the office cleaned every two days instead of daily. Working more efficiently saves valuable resources.
4 – Reduce Damage to Equipment
Damage to equipment affects business expenditure in two ways. Firstly, damage reduces productivity while the repairs take place. Depending on the importance of the piece of damaged equipment to the overall process, this could put a whole factory floor out of production for some time. Secondly, damage to equipment costs to repair in labour, time and parts.
Ensuring that employees follow processes to prevent damage to equipment can add up to huge cost savings for the company in the long term. Regular checks and maintenance of equipment can replace worn parts before more serious and costly damage occurs.
5 – Shop Around for Suppliers
Make sure you are getting the best deal for essential supplies for your business. You may need to invest some time to shopping around but the cost savings can be enormous.
For example, if you can buy the same quality of paper for the office cheaper by just 50 cents per ream, how much could your business save over a year? If your business purchases just 100 reams of paper in a month, you would save $600 a year. If you made this kind of saving on every product you purchase by switching suppliers, you could add up substantial cost savings over a year.
Obviously, this kind of saving does operate on economies of scale and the larger business will achieve greater savings, but any business can save by switching suppliers to cheaper options.
6 – Staff Incentives for Cost Cutting
Some companies are offering employees a share in the cost savings made over a specific period. This encourages and motivates staff to work more efficiently, reduce injuries, damage and to participate in reducing costs themselves, rather than leaving it all up to the managers.
For example, if your employees can reduce costs by $10,000 a month for six months, your company will save $60,000. If you give even 50 per cent of that back to the employees in staff incentives and bonuses, your business will still save $30,000 in six months. Offering staff a share of 25 or 10 per cent of the cost savings would give your company even more benefits, while still encouraging the staff to reduce expenditure on behalf of the business.
There are many other ways of reducing expenditure by the business. Every cost saving you can make, gives the company more profit and reduces the impact of the global financial crisis. Cutting costs now can ensure the business survives the tough times and is still viable when the economy improves.
Link for this article:- http://www.yourstory.in/resources/finance/1333-six-ways-to-cut-business-costs-
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