Although the current circumstances are unique, the majority of financial heads will have seen cost pressures arise before for all kinds of reasons. Internal sales issues, market changes, rising labour or materials costs, new regulations, problems with supply chains: the list is endless. Whatever the cause, this is your time to shine as you plan how your business can deal with today’s cost pressures and navigate a way forwards.
First, it’s imperative to gain a clear understanding of the depth and scale of the problem. The most effective way to make this level of forensic financial analysis is to use the data management tools within a financial software package. By using a tool that draws together real-time operational spending information across departments, you can get a detailed grasp of what’s happening. Choosing a cloud-based data tool is also a good idea, as it means that everyone across the organisation can access up-to-date figures on organisational finances – saving your finance team time and encouraging a transparent spending culture too. Another useful approach is to run ‘what if’ scenarios taking account of how various new challenges or restrictions could impact your forecasts.
Some finance leaders prefer to operate instinctively rather than on the basis of data-backed evidence. But this isn’t usually the best approach, especially if sweeping changes are required to keep the business in a stable position. Having detailed evidence to hand in the form of comprehensive, real-time data and reports makes it much easier to make difficult decisions as it removes any emotive elements and simply focuses on the facts.
Cost control action plan
- Revisit past cost saving ideas, including those which weren’t actually implemented. They may not have been suitable under different circumstances, however, they could well be more relevant and applicable now.
- It might sound counter-intuitive, but now is a good time to invest in staff training. Not only it can help you to achieve better results such as increased productivity and efficiency, it can also improve staff retention which could save money in the long run. There are plenty of online training options available now and some software packages include access to learning management resources on various topics which are worth investigating.
- Morale can be negatively impacted when businesses are facing difficult trading conditions, but boosting morale needn’t just be about expensive incentives. Offering small rewards or public praise can be effective too; it can also help encourage staff to keep doing their best, even during challenging times. Some modern software packages include useful ‘praise’ tools which make inclusivity easier, even for remote workers.
- In the midst of a tough trading period, keeping staff in the loop really helps to build trust and a team spirit. Why not get your staff involved in trying to resolve the wider challenges facing the business by asking for their ideas on how to cut costs. Sometimes, great ideas do emerge when the pressure is on.
- Ensure the business is communicating with existing customers, even if trading is down. Obviously, some will be worth more to your business than others. By finding out who are your most valuable customers, the business can concentrate on nurturing them and protecting existing revenue streams.
- Review the terms offered by your current suppliers as well as the contracts in place to ensure costs and processes are being optimised.
- Buffer your company against currency fluctuations. If you buy or sell overseas, the value of the pound against the other currencies you transact in can be crucial. To help get a competitive rate, investigate using a foreign exchange company that can help manage the ups and downs of the exchange rate.
- Consider increasing prices. Can you hold the costs of your products or service, but charge more? As long as sales don’t suffer, your bottom line should benefit.
- Keep a close eye on stock levels. Software can help you to optimise stock levels and manage warehouse space, reduce wastage and increase productivity. This is especially worth considering if you’re a wholesaler or a retail distributor/supplier.
And finally…
Once this immediate crisis has passed and the balance sheet is looking a little healthier again, make time to think about putting plans in place to protect against future problems. It’s rarely ever wise to immediately increase spending again once finances are under control. Instead, you should implement a plan of cautious spending rises and targeted, restrained hiring of business-critical staff – all in line with the forecasts generated from your data.
If you are focused on cost optimisation and need to get your finance team and systems working at their best, get in touch.
We have a host of ways to make life a whole lot easier for your staff and your business.