10 Business Cost-Cutting Techniques
Now more than ever cash is king. Remember businesses don’t go bust they simply run out of cash. You need to get tough and creative with your cash flow strategies. Here’s our 10 business cost-cutting techniques countdown to show you how.
1. Get staff buy in
Cost-cutting tends to be unpopular with staff. However when faced with the reality that their jobs may depend on it they will likely play along. So trust your staff enough to be open about the facts of the situation and the importance of everyone’s contribution. Cash is kind and everyone should to do their bit.
2. Work on your forecasting strategies
Work to improve your ability to forecast your potential future trading numbers. This will better position you to make difficult calls on resourcing levels, marketing and stock inventory through the recession and when the economy begins recovery.
3. Chase your debtors.
Chasing the settlement of an account of a long standing client is always going to be awkward. However, in failing to collect your debts in a timely and prompt fashion you effectively extend your clients an overdraft facility. Banks give overdrafts, not you. So get those outstanding debts collected now.
4. Review Utility costs.
Gas, Electricity and Water bills are some of the highest controllable bills your business will pay. Be sure to regularly shop around for the cheapest supplier and avoid running month to month on estimated meter readings. If you do find that you are owed a rebate become a dog with a bone with that money no matter what the amount. Remember they would treat you no differently if the tables turned.
5. Restrict business related travel.
A large portion of business travel is bore out or obligation rather than necessity. Be open with your clients and establish if your attendance in person is really required. Suggest alternative methods of communication. For example, video conferencing or webcams.
6. Cut the Cost of Debt.
Often expensive and excessive debt is what runs companies into trouble. Get your accounts settled and use a portion of that cash to payoff some of that debt. Shop around with other banks and see if they are interested in taking over the loan. Times are still tough for them but they still need to lend money to the right people so why not try.
7. Automation or repetitive processes.
Decide if you sales transactions could be automated online. Also look into the unpopular decision of possible automation of some manned procedures. It’s hard but remember your businesses health and positive cash flow should be given priority.
8. Consider outsourcing.
If you’re in manufacturing consider sending part or your entire product to Eastern Europe or the Far East. If you deal in the labour markets think about outsourcing certain tasks to India or China. Beware though, outsourcing can require careful and time consuming managing and while reducing direct labour costs can increase your time while regulating output quality.
9. Cut consultants.
Using consultants instead of staff can be a false economy. Having a resource which is only charged for when used is great, but when you do choose to retain their services you will pay for it. Consider if a core member of staff could tackle the same role if given access to appropriate training and support. Alternatively see if you can negotiate a low consultant rate with integrated PRP rate.
10. Cut cost from the top down.
Starting your cost saving strategies with directors first is imperative. Remove senior staff perks. If they really must take that client to lunch then go somewhere which is having a two for one offer. It’s possible to be creative with cost-cutting without looking cheap. These steps are tough but it sends the message loud and clear to the rest of the company.
Managing business costs is everyone in your organisations duty and responsibility. This is never more so than when times are challenging. So use the above points to toughen your organisations resolve and rally the troops behind you in preparation for better times.