The current business climate isn't optimal and most businesses face tough times due to the COVID-19 crisis. Businesses need to be flexible to adapt to an ever-changing environment. The fact is that most businesses will have to prepare to cut costs to continue operating. According to Gartner, 90% of companies are currently performing cost-cutting analysis and activities.
If your business struggles financially because of COVID-19, a cost-cutting analysis should be a priority.
Ways to cut costs that won't be fatal for your business operation
Consistent financial analysis and planning support predicting activities of future cost-cutting activities. Financial analysis provides valuable information to prepare for challenging economic periods. It is hard to say that anyone was ready for COVID-19 and its financial hit on the global economy. The way to reduce the fiscal deficit is by reducing business expenses.
Here are a few ways to cut business costs, balance expenses, revenue, and operate tough times.
Plan your finance
The first aspect of effective cost-cutting is analysing and managing your finance. Most businesses overspend on financial services that aren't crucial for a business operation. If you analyse all the financial costs of business operation, there will be a space for money saving.
• Account fees. Check with the bank your current account fees. Analyse the services, and cancel services that won't disturb your business flow. For instance, several UK banks are offering free business accounts for small businesses. If your current bank is too expensive, changing the bank might be the best option. Some banks even offer huge discounts on services during the first year.
• Credit card fees. The interest rates for business credit cards are often too high. Paying your credit or even cancelling a credit card can save tremendous sums.
• Active accounting. An active accountant analyses a company's financials and gives advice based on the analysis. There are ways to reduce tax burdens and achieve tax breaks. These benefits come with precise financial planning. Hiring an accountant who's knowledgeable about the country's tax laws and regulations is a must.
• Pay your suppliers early. If possible, negotiate a price for paying early. Paying early can lead to discounts which reduce the costs of the same goods or services you're going to pay.
• Refinancing. Overdraft on business accounts come with monthly interest fees. It increases the total costs of running a business, and the advice is to refinance. Negotiate with a bank changing from overdraft to a loan that won't add to financial liability.
Negotiate utility bills and limit cash spendings
Utilities can be a massive financial burden, so assess your utility expenses and find ways to reduce the costs. Make a list of monthly business utilities including commuting costs, electricity, rental costs, internet, office utilities, etc. Renegotiate the prices with suppliers, as no one wants to lose a customer. Nowadays, the majority of suppliers doesn't require contracts for services. It means it's easier to renegotiate the service prices, as you're not bound to a supplier.
Negotiating internet costs and office equipment supplies should be your first stop. Save on energy costs by investing in LED lighting. Turning the heater down or turning the lights off during the night will reduce the footprint and save money.
Whenever you're buying equipment or getting a new contract on utilities, it's important not to rush and research the market to get the best deals.
Consider remote working
Remote working saves commuting and rental costs, so it might be a viable option if your business allows it. COVID-19 forced businesses to introduce remote working to some aspects of their business. Did you know that 15% of UK workers are willing to accept a 5% salary cut to work from home?
According to a Hubstaff survey, 80% of businesses reported they would offer a form of remote working after COVID-19. 40% of companies expected that remote working shift would increase employees' productivity, leading to higher profitability.
Plan and communicate with employees to engage them in a remote environment.
Plan the cost-cutting process to avoid disruptions
The cost-cutting process eliminates some business operation processes employees get used to. It can cause disruptions among employees which decreases productivity and profitability. Plan an effective strategy to give employees enough time to adapt.
Choosing the wrong strategy can cost you more since it can reduce productivity as every change can alienate the employees. The strategy should be consistent and incremental to succeed in the long term. Did you know that only 11% of businesses reported they'd maintained a cost-cutting plan for three consecutive years?
Pick the cost-effective cloud-based software solutions
Software solutions aren't as expensive as before since most software tools are cloud-based. That approach reduces the costs of developing tailored solutions for each client. If you're an agency that runs marketing campaigns, tools such as Ahrefs or SemRush are crucial for business scaling.
These cloud-based tools provide features that save time on research and provide you with in-depth analysis and reports. You can get a monthly or yearly license for a fraction of the amount you can earn from the clients.
If you manage many employees and departments, manual schedule planning will add a financial burden. Modern employee scheduling solutions save time, money and frustration while creating dynamic schedules. It will remove the burden from an HR department, which not only saves costs but can help you to focus resources on more cost-effective activities.
Analyse the business needs, identify time sinks and efficiency leakage, and see if the software can help. The old ways of cumbersome solutions with dubious returns are gone. Technology allowed developers to offer cloud-based software that delivers real cost reductions.
Successful cost-cutting strategy requires a thorough planning and incremental implementation
Unfortunately, cutting costs became the reality of many businesses, no matter the industry. COVID-19 hit the global market hard, and a quick adaptation is a must for businesses to survive. Perform in-depth cost-cutting analysis to avoid disrupting your business operations and reduced profitability.
About the author
Rob Press is a content marketing manager at Deputy, a robust scheduling software that can be used to manage your workforce in a wide variety of different industries. Aside from helping businesses reach operational efficiency, he keeps up to date with the latest trends in SaaS, B2B, and technology in general.
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