For many Australian businesses, recent months have been particularly challenging, which has, consequently, placed additional strain on their finances.
In response to this, many of those doing it tough are now looking for ways to cut back and; thus, preserve the ongoing viability of their company. However, while such action may be tempting, getting swept up in indiscriminately slashing costs can be incredibly harmful to a business’ ongoing prosperity.
Before hastily making decisions under pressure, considering their long-term implications is imperative. There are various ways to cut back on costs; however, some can be a false economy and, over time, may actually leave you worse off.
By carefully assessing how best to cut costs given your business’ circumstances, you can survive these challenging times, all the while positioning your organisation for future success.
Focus on ‘Right-Sizing’
When navigating the current climate, rather than eliminating expenses left right and centre, consider using a less aggressive approach.
When organisations experience a downturn, one of the first places they often look to cut costs is their workforce. However, once business starts to take back off, those who’ve made a number of staff redundant risk being left without the manpower to regain momentum. Furthermore, down the line, hiring and training new staff can add additional cost barriers for businesses trying to get back on their feet.
With this in mind, instead of ruthlessly reducing workforce costs, you may consider applying a 60/40 approach. This is where current staff completes 60 per cent of work, while an itinerant workforce conducts the remaining 40 per cent. With this model, existing employees focus on the business’ day-to-day operations, with other capable individuals being brought in on an as-needed basis.
Also, if business is relatively quiet, it can be a good time to encourage staff to take some of the leave they’ve accrued. This can, in many circumstances, create a win-win situation, whereby your employees get to enjoy some time off when there’s far less going on than usual.
Beyond this, by staying up-to-date on government initiatives, such as the JobKeeper scheme, you can gain any financial support you’re entitled to.
If you’ve accumulated a large number of assets, some of which aren’t completely necessary, now could be the time to repurpose, sell or retire them.
By assessing whether certain physical assets are helping your business achieve profit and/or achieve your organisational goals, you can eliminate unnecessary additional costs weighing on your already tight finances.
Reconsidering and taking charge of your expenses is another way to manage costs for effectively during tough times. However, when doing this, you want to ensure you’re not cutting back to the point where your company struggle to complete profitable work.
When it comes to insurance, for instance, you don’t want to be cutting corners, especially at such a high-risk time. Alternatively, you want to be making sure you’re getting the most out of your insurance, choosing reputable insurers that you can rely on. This means that, if the unprecedented does occur, your claim will be processed as efficiently as possible, so you can get back to business sooner.
However, in some other areas of business, such as your supply chain, you may be able to negotiate lower prices and the like for a certain period of time. This can help lighten the load in the short-term, giving you the means to bounce back once normal economic conditions return.
For more information, or if this article has brought up any queries, please don’t hesitate to get in touch with your insurance advisor.
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