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Running a business is a challenge at the best of times, but throw in a pandemic and the associated economic woes – and cost cutting has never been more important. So, in what areas could your business improve on when it comes to keeping that expenditure down? Let’s talk…
Vu Tran, Co-Founder, Go1
There are many ways SMBs can cut costs, but given the pandemic, it’s even more important than ever to balance any action with staff wellbeing.
Conduct an audit of your biggest cost centres. It’s important to have a clear view of all expenses to help guide which costs can be slashed. For example, could a virtual assistant replace the administrative tasks of a few people so they can provide higher value contributions that can have a greater impact on revenue?
Staff training is another secret weapon – with minimal investment, it can do wonders for the productivity and morale.
With remote working and hybrid working set to continue, reducing office space may also be desirable. For some businesses, switching from traditionally leased space to an on-demand co-working space (or desks) could offer further cost savings.
Stephen Barnes, Principal, Byronvale Advisors
In a time of crisis in a business, like most businesses are facing now with COVID-19, it is vital that decisions are made.
With cost cutting, go fast and go hard.
If you suspect that sales are going to decline, and debtor days are going to lengthen, cut back your overheads now. Waiting until the sales slow and the cash cycle lengthens, or waiting to see what happens in a week, a month or a year, is to me like watching a car crash in slow motion.
Cut back your overheads now and cut them back hard. Then, when circumstances improve, grow these expenses slowly. You might even find you come out of the crisis a lot stronger and leaner business.
Dunya Lindsey, COO, Wiise
Amid the pressures of COVID, many businesses have had to take a good hard look at their expenses to determine where cost-savings can be made. In a time where survival is key, cash flow becomes absolutely critical – running lean is a priority right now.
Automation is one way to save costs. Labour-intensive, manual processes such as re-keying information are a direct hit to a company’s productivity and ultimately cash flow. Automation enables staff to spend more time on higher value tasks such as maximising sales, keeping customer satisfaction high, or getting orders out in time.
Understanding the true cost of sale is also key. For manufacturing and logistics businesses, freight costs have rocketed, likewise the price of imported goods. The cost of sale has to be recalibrated. To do this manually is very complex, but cloud-based ERP systems can automatically recalibrate costs due to changing shipping fees and taxes to ensure a profit is always being made.
Ollie Watts, Co-Founder, Hey Bud Skincare
Applying cost-cutting methods can bring immediate savings and improvements to the profitability of your business. As a growing E-Commerce store, Hey Bud Skincare constantly requests updated contracts from its courier and handling companies as well as its payment processors. Talk to these companies and they will provide baseline figures to achieve these cost savings.
As a start-up, invest your time in learning new skills (such as media buying, website development or video editing), if it helps you grow your business without risking your long-term goals. You’ll save on outsourcing fees and learn a useful skill set at the same time.
It’s also who you know that brings success in cost-cutting. Reach out to people who have more experience in the same field and industry than you – they can save you time and money by sharing with you their costly mistakes which you can avoid, and also provide tips that can optimise and grow your business.
Jarrod Kinchington, Managing Director, Infor ANZ
As companies embark on digital transformation journeys, there are significant savings to be made by adopting infrastructure – and software as-a-service solutions, and replacing the “traditional” hardware and software approach. Choosing the right cloud partner not only saves money, but provides the ability to rapidly scale your business accordingly and remain resilient in today’s business environment.
Intelligent solutions that include automation, machine learning, asset management and workforce scheduling can reduce hours of mundane tasks and administration, giving employers the opportunity to re-purpose their staff to focus on higher-value work.
Modern and industry-specific software, purpose-built for different micro-verticals, can help simplify business processes and foster closer collaboration amongst employees – especially in the new remote and hybrid working world.
More advanced organisations are expected to accelerate their adoption of artificial intelligence and business analytics that will enable them to accurately forecast supply and demand in real-time.
It’s also important to audit the services you currently have and discontinue those you no longer use (but are still paying for) as well as duplicate services you may have subscribed to.
Ryan Miller, CEO, Keeping Company
If you start any cost cutting exercise by first targeting the line items in the budget which cost the most, you’ve missed a critical step – aligning cost cutting with the business strategy.
Start with the business’ overarching strategy. What will achieve a return on investment against your strategy and what won’t? Going paperless, renegotiating supplier contracts and cutting discretionary costs like entertainment or gifts will deliver savings without impacting your business goals. However, making overly deep cuts to headcount, for example, could lead to the business becoming too under-resourced to achieve your strategic goals.
Other options for cutting costs include outsourcing or automating tasks, transitioning to a partly or fully virtual office, changing banks to a more cost effective facility, consolidating any credit cards or establishing a system to automate payments or provide reminders to make payments so you can avoid unnecessary late fees.
Joseph Robins, Payments Expert, GoCardless.
According to the Forrester report, 85 percent of businesses have more than 20 people responsible for managing payments, and more than 60 per cent of surveyed payment decision-makers said the most time-consuming areas are matching payments to invoices, and reconciling reporting from different gateways or processors.
This more than often means that businesses of all sizes need dedicated staff to manage the different stages of the payment process, be it manually entering payment details into a legacy system, generating payment files to be submitted to a bank, manually reconciling each day or chasing late payers.
There’s a big misconception in the difference between price and cost when it comes to a payment solution. Your “cheap” provider may charge you cents in transaction fees, but could be costing you thousands of dollars in human intervention. Now imagine those staff are freed up to work on “value-add” initiatives like expansion or increasing sales, and it quickly becomes evident that spending that bit more for a fully automated solution can have a huge impact on your business as a whole.