For many organisations, March 11th, 2020, was a turning point. Within a short timeframe, numerous companies worldwide had to rethink their way of working entirely. Non-essential factories slowed or shut down, and businesses which previously frowned upon homeworking suddenly ushered people home with a laptop.
As countries and industries are now slowly reopening, businesses around the world are looking to improve their operational efficiency to help them survive long enough for things to get back to “normal”.
After implementing some of the most basic cost reduction measures, executives and business owners can take more in-depth steps to further reduce business costs. An expense management system can help do this and increase efficiency to not only maintain profitability, but also ensure a business’ survival.
Blindly cutting costs left and right could have much deeper and more adverse consequences on a business than intended. In some cases, the remedy may be worse than the malady. Start by taking a good look at your expenses from the last 6-12 months and identify all variable spend. These expenses can include:
Some “variable” spend, such as an employee’s commission on sales, is more fixed than others and can’t necessarily be cut, but it’s worthwhile having on the list for visibility.
An expense management system makes identifying and listing these categories of variable spend a much faster and easier task with the help of reporting. The system lists the categories and the associated spend is easily accessible, ready for analysis. The important thing to remember here is that no expense is too small to be investigated, and every expense is worth examining.
Consider multiple scenarios and whether you will need to cut costs you rather wouldn’t (such as laying people off) or if you can make the numbers work differently. SaaS companies often have a yearly indexation clause which isn’t always applied. If this is the case in your organisation, consider going over older contracts and enforcing those indexations. Suppliers you’ve worked with for a long time may be more willing to cut you some slack on payment terms or offer you a discount if this will help your company survive and remain a paying customer of theirs.
Finding these costs and aggregating the data is easy with an expense management system. And you can use those numbers to your advantage when negotiating with suppliers to ensure the best possible prices, future-proofing your business just a little bit more.
Knowing what can be achieved in good times and in lean times will allow executives to plan accordingly based on which way the numbers are tilting.
In “worst-case” scenarios, expectations both within the company and from customers will need to be addressed and revised. This may mean reducing customer services hours (and therefore employees’ working hours) or the quality of a certain service if this can be done without adverse consequences.
Part of your forecasts should also include at least one “rebound” plan to ensure that employees and the business are ready to roll once the economy picks up again. This rebound plan could include checking in with any furloughed employees (but not too often!) to let them know when you expect to be able to bring them back on. It could also require having a marketing plan ready to deploy as soon as business improves. Whatever the rebound means for you, make sure you have a realistic strategy in place and that it’s one you will be comfortable rolling out.
Large organisations around the world are facing backlash for having spent their tax cuts and cash reserves buying back their shares to drive up their stock prices, leaving them with no cash to spare and asking for governmental aid in the midst of a crisis.
Having a comfortable and reliable cash flow is essential when the economy isn’t doing so well, especially for newer or smaller businesses which may not have access to credit lines or built up good reputations with their creditors yet.
A few simple ideas to ensure adequate cash flow include:
Access to up to date and accurate data is key in ensuring proper decision-making. Spend categories, as well as vendors, can easily be identified and analysed with the help of your expense management system (EMS). Centralising spend data in an EMS allows for fingertip access and strategic management choices. And while we don’t recommend rushing into cost reductions, speed is of the essence when future-proofing a business in a time of crisis and easy access to correct data is a significant contributor.
Big plans such as a move, a re-brand, an office redecoration or any project with substantial costs and no immediate returns should be cancelled or postponed by at least a few months if not a year. What this means will be different for each organisation. Maybe it’s putting on hold an order for new machinery or IT equipment. Perhaps it’s looking long and hard at whether those new facilities are worth it considering a reduced workforce or the new work from home policy. Or it could be not attending a long-awaited roadshow or trade conference.
Whichever line items weighed heavy on your budget are worthwhile delaying until the economy settles and you have a better idea of what is going to happen to your business. This change will be painful for employees and/or the affected suppliers depending on the item, but it’s a necessary pain if the business is to survive.
An EMS can (and should) centralise more than just travel expenses. Corporate cards and travel management are certainly types of expenses which can be managed by an EMS. But so are other recurring and non-recurring employee-based costs: fuel cards, mobile phone subscriptions and more can also be consolidated in an EMS for better expense tracking and reporting. And this means a tighter grip on your budget, with increased control on costs and improved cash flow management.
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