Now more than ever it is easier to reduce costs by doing many tasks electronically. For instance:
- Move routine communications to email or instant messaging.
- Bank online for both payments and receipts.
- Bill electronically.
At an operational level, you should be scrutinizing every expense or overhead line item, looking for areas of waste or opportunities to lower cost:
- Negotiate new terms for property leases, offering longer terms at a reduced rate.
- Where possible, consolidate occupancy.
- Consider switching to homeworking for staff ,and so release property requirements but ensure that communications will not be impeded.
- Consider the extent to which you can operate hot desking.
- Negotiate or switch communications carriers ensuring that each category (voice, mobile and data) is optimized for your consumption levels.
- Review communications consumption with each person who uses company cell phones to determine the best patterns of use commensurate with different levels of doing business.
- Where possible, switch to low energy lighting, reviewing the cost/benefit of acquiring low-energy light bulbs and their ongoing consumption cost. Obtain guidance on this from your energy provider and request an energy audit.
- Consider the cost impact of reducing the amount of energy you consume. Examples might be reviewing the times of day when air conditioning is used and the temperatures at which it is triggered to come on and off.
- Endeavor to eliminate printed material and associated postage. You won’t get rid of it all, but you can almost certainly make material savings. Review the potential to use online storage services such as Google or Boxes.net
- Defer the purchase of new printers, concentrate on using laser printers rather than inkjet printers. Inkjet ink costs are astronomical but can be significantly reduced by using refillable cartridge services.
- Consider the frequency of janitorial services. Does the office really need cleaning every night? Might staff at least partially fulfill that service?
- Renegotiate bank service charges. Moving to electronic funds collection and disbursement should reduce costs. Right now, your bank will be more concerned with keeping your business and will be disposed to talking about fees.
- Review all forms of advertising and consider alternative methods of communicating your message. If your company doesn’t have one, invest in a blog as a way of communicating rather than continuing to send fliers and other promotional material. Examine whether online advertising might be better for your class of business.
- Eliminate all unnecessary travel and ensure that travel costs are optimized. It is surprising how much can be saved by using services like Kayak and considering alternative lodging.
- Consider whether you can make general savings by using purchasing cards. Companies like Concur and Rearden Commerce provide purchasing services that can lead to significant costs savings.
Managing cash flow
- Companies don’t go under for lack of profitability. They go under for lack of cash. Therefore, apart from reducing cost, you need to optimize incomings and plan outgoings.
- Many smaller businesses are poor at credit control. But in these times, this is one of the most important skills you can exercise. It is not just about debt collection but efficient recovery. So for example, look at your best customers and consider offering them discount for early settlement. This will ensure that you accelerate collections. Review your worst payers and consider ceasing business with them or applying onerous surcharges for late settlement. No one likes to cut off customers; but if they’re not paying, then they’re not worth the business.
- Think about how you can plan the timing of incomings and outgoings so that cash is balanced as closely as possible.
- Review lines of credit. You may find it difficult to obtain additional credit at favorable rates, but the more you can show you are exercising restraint and managing your business well, the more likely you are to receive a favorable decision.
- Obtain help and advice from your accountant in planning for cash flow. He or she will ask the kind of searching questions that will make you think about how best to manage cash.
Increasing business volume
While it may sound strange to talk about increasing business, there are always ways of doing so. Examples might be:
- Can you bundle services more attractively so that customers will want to do more business with you but without incurring cost?
- Are there lines of business that you could shut down, substituting for others that are more profitable?
- Are you maximizing the potential of your best lines of business?
Make sure you to take the right professional advice for each type of issue you are tackling. Your accountant can be your best friend, so consider allowing him electronic access to your books and records. If you’re not already doing so, use software as a service offerings from companies like Netsuite and Freshbooks as a way of ensuring you can do so.
Anything that would be capex should be moved to opex. This will lower costs in the longer term and not saddle you with assets that cannot easily be turned to cash.
Be optimistic. The dark clouds may be gathering but they will pass in time, at which point you will be fitter and leaner to take advantage of the next upswing.