Make Time to Reevaluate Business Expenses
If your business is in a tough position right now, reevaluating your business expenses can help you to stay afloat. Here are some tips on how to cut costs.
Eliminate Unnecessary Expenses
Many businesses may not even know that they are being charged or charged more than necessary until they take a hard look at how they are spending their money and what those expenses add up to annually. The first step is to audit your budget and expenses. The second step is to determine which expenses are truly necessary. One way to do this is to ask yourself if the business could keep going without it. If the answer is no, eliminate it.
Negotiating with vendors is another option. Because it takes so much less effort to keep a customer than gain a new one, many vendors will be willing to reduce costs, especially if you have an established relationship. It’s easier to pare down variable costs like office supplies and travel than it is to lower fixed costs like rent or insurance, but with some effort and negotiation you can reduce both types of business expenses.
Buy in Bulk
Buying in bulk is another way to save money. While you’re negotiating other expenses with your vendors, ask for a discount on your materials, your office supplies, or anything you might have the space to store. Software subscriptions can also be bought at a discount in bulk. Be careful choosing which subscriptions to keep, though. Many different types of software or apps offer the same or similar functionalities. Select the ones that best and most comprehensively meet your needs and then train your staff to use those. It’s also good to periodically reevaluate them based on input from your staff about what’s working.
Staffing Costs and Responsibilities
Staff costs are often the largest expense that companies have. In a recession that means employee layoffs are one way a business survives hard times. Layoffs are hard on business owners and their employees. No one wants to lay off good employees, and no worker wants to become unemployed.
Many business owners look at their staff as family, in fact, and worry about what would happen to them if they were to be laid off in a terrible economy like this. For companies that have invested in their employees and trained them in beneficial skills, laying them off also means taking the risk that the money invested will eventually be used by another company, perhaps even a competitor.
In the current recession, there’s another aspect to holding on to workers. The federal government offered loans through the Paycheck Protection Program, and many businesses applied for and received those loans. If they follow the requirements of the program, much of that money is eligible for loan forgiveness and will not have to be repaid. The U.S. Government offered this program as a large incentive for companies to retain their employees, and it helped. There are creative ways that businesses can comply with PPP requirements and still save money in the short run.
First and foremost, companies should be open and honest with their employees about their financial situation when possible. Owners that work with their staff and communicate what their needs are have a better chance of getting the cooperation they need to keep their businesses running without big layoffs. If the problem is that too many employees are standing around without customers, one solution could be to ask staff to take their vacation now rather than later in the year.
Downsizing leased space and moving towards a more permanent remote work model can also reduce expenses and save jobs. Money saved on insurance, utilities, and rent by leasing less space or less expensive rental property can help keep workers employed. If you want to make a change but cannot get out of your lease agreement, ask your landlord about deferred lease payments or look into loans or grants being offered to businesses as a result of COVID-19 relief.
Now is the time to get creative and look into every option being offered. You worked hard to build your business. If you want it to survive 2020 and thrive in the future, examine your business expenses, determine what you can and cannot live without, and get creative about finding solutions, including brainstorming with your company leadership and employees. If you are unsure where to begin and would like professional advice, Prometis Partners can help. We work with our clients and make recommendations on how to strengthen or eliminate any weak areas. Contact us if you need assistance. That’s why we’re here.