After the turning point of March 2020 when many companies worldwide had to entirely rethink their way of working came Spring 2022. The cost of living crisis affected many, throwing additional difficulties at businesses still reeling from the effects of the pandemic.
In the wake of these global events, businesses around the world have looked to improving their operational efficiency to better help them survive crises and weather future storms.
If you're aiming to reduce your business costs without impacting your bottom line, we have put together a 3-step checklist that will help get you started.
1. Review budgets & income
Know your business expenses
Blindly cutting business costs could have much deeper and more adverse consequences than intended. Start by taking a good look at your expenses over the last 6-12 months and identifying all variable spend. These costs can include:
- Donations or other discretionary spend
- Employee and customer gifts (holiday chocolates, “get well soon” gift baskets, etc.)
- Optional employee training (non-essential language courses, vocational training not directly related to an employee’s work, etc.)
- Marketing costs (booths, fairs, etc.)
- Variable salaries (e.g. commissions on sales)
- Travel expenses
Some “variable” spend, such as an employee’s commission on sales, can’t be cut, but it’s worthwhile putting it all on the list for visibility.
An expense management system makes identifying and listing these categories of variable spend a much faster and easier task with the help of reporting. The system lists the categories and their associated spend is easily accessible, ready for analysis.
The important thing to remember here is that no expense is too small to be investigated, and every expense is worth examining.
With this spend data in hand, executives can more easily go about the task of deciding which costs will have the highest impact when reduced, while causing the minimum negative effects to the business.
Ensure you are budgeting with up to date data
Consider multiple scenarios and whether you must cut costs you rather wouldn’t (such as laying people off) or if you can make the numbers work differently. Ensure you have access to up to date reporting and data for this.
An underrated way for SaaS companies to increase income
SaaS companies often have a yearly indexation clause which isn’t always applied. If this is the case in your organisation, consider reviewing older contracts and enforcing those indexations where possible. Suppliers you’ve worked with for a long time may be more willing to cut you some slack on payment terms or offer you a discount if this will help your company remain a paying customer of theirs.
Finding these costs and aggregating the data is easy with an expense management system. And you can use those numbers to your advantage when negotiating with suppliers to ensure the best possible prices, future-proofing your business a little bit more.
Create a “best case” and a “worst case” financial forecast
Knowing what can be achieved in good times and in times of crisis will allow executives to plan accordingly based on which way the numbers are tilting.
In “worst-case” scenarios, expectations both within the company and from customers must be addressed and revised. This may mean reducing customer service hours (and therefore employees’ working hours) or the quality of a certain service if this can be done without overwhelmingly adverse consequences.
Part of your forecasts should also include at least one “rebound” plan to ensure that employees and the business are ready to roll once the economy picks up again. This rebound plan could include checking in with any furloughed employees (but not too often!) to let them know when you expect to be able to bring them back on. It could also require having a marketing plan ready to deploy as soon as business improves.
Whatever the rebound means for you, make sure you have a realistic strategy in place and that it’s one you will be comfortable rolling out quickly when the time comes.
2. Balance cash flow with business activities
Large organisations around the world faced backlash in 2020 for spending their tax cuts and cash reserves buying back shares to drive up their stock prices. This left them with no cash to spare and asking for governmental aid in the midst of a crisis.
Having a comfortable and reliable cash flow is essential when the economy isn’t doing so well, especially for newer or smaller businesses which may not have access to credit lines or built up their reputations with creditors yet.
A few simple ideas to ensure adequate cash flow include:
- Carefully review personnel expenditures such as schedules and the variable costs mentioned earlier.
- Institute or maintain remote working policies to lower costs for travel, supplies and other utilities.
- Defer new hires unless they will have a direct and immediate positive impact on your income.
- Cancel or reduce non-essential projects and contract work with freelancers (after cautiously reviewing agreements and termination clauses).
- Comb through all service contracts, cancel non-essential services and defer renewals wherever possible.
- Have honest discussions with your vendors and suppliers about the potential for delayed payments and try to negotiate lower rates.
- Shop around for better deals. Now is the time to look around at what other vendors offer and maybe switch to one with better rates, better service, or extended payment delays.
Access to up to date and accurate data is key in ensuring proper decision-making. Easily identify and analyse spend categories and vendors with the help of your expense management system.
Centralising spend data in an expense solution allows for fingertip access and strategic management choices. And while we don’t recommend rushing into cost reductions, speed is of the essence when future-proofing a business for difficult times and easy access to correct data is a significant contributor.
3. Reconsider business activities to help with spend management
Consider cancelling or postponing big plans such as a move, a re-brand, an office redecoration or any project with substantial costs and no immediate returns.
What this means will be different for each organisation. Maybe it’s putting on hold an order for new machinery or IT equipment. Perhaps it’s looking long and hard at whether those new facilities are worth it considering a reduced workforce or more widespread remote working policies. Or it could be not attending a roadshow or trade conference for the moment. Whatever can help you manage your spend more efficiently.
Whichever line items weigh heavy on your budget are worthwhile delaying in difficult times or until you have a better idea of what is going to happen to your business. This change will be painful for employees and anyone else affected, but it’s a necessary pain to help the business survive.
Mobilexpense: expense management you can count on
Your expense management solution can (and should) centralise more than just travel expenses.
Corporate card purchases, travel and allowances are all types of expenses which can be managed by an expense solution. But so are other recurring and non-recurring employee-based costs: fuel cards, mobile phone subscriptions and more can also be consolidated in an expense tool for better expense tracking and reporting.
And this means a tighter grip on your budget, with increased control on costs and improved cash flow management.
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