Cost-control Strategies: Temporary Solution or Preventive Maintenance?
With all the problems plaguing the global economy, many large companies have had to downsize their operations and lay off thousands of employees. But it has also become a trend to carry out cost-cutting strategies as a preventive measure in anticipation of gloomier days ahead.
For small-to-medium enterprises that are easily affected by fluctuations in the global and local market, striking a balance with cost-control strategies should lie somewhere between being a short-term solution and an integrated preventive measure.
Cutting Down Expenses
The easiest method of cutting costs is to focus on the minute expenses of daily operations. Simple things such as switching off office equipment or air-conditioning to save on electricity, minimising the use of office transportation, or reducing hours doing overtime, these are little sacrifices for employees that can help reduce overhead expenditures, however small the amount.
These changes can sometimes make work uncomfortable. But as short-term solutions, the main point is the perception that the changes are temporary until the situation gets better.
For Now vs. For the Future
Regardless of the economy, cost-cutting strategies will always be part of the agenda. Companies that continue to survive the economic downturn are seeing that with lesser resources, they are able keep afloat or do more. Even if the cycle goes to a more prosperous phase, it would be best to have an expense plan that has both short-term and long-term strategies.
Now:
Small item purchases should be monitored and have a check and balance. For large purchases, it is a general rule to have 3 independent price quotations for a large purchase and to always bargain for a lower price.
Future:
Large purchases should be investment pieces that would benefit the company for extended periods of time. These include durable machinery, green technology, or bundled services.
Now:
Companies may be forced to forego a chunk of their marketing and advertising budget. The key is to re-analyze the target demographic and assess other alternative media like social networking sites. Perhaps in difficult times, it would help to go directly to the consumer rather than to wait for them to come.
Future:
If funds are accessible, it is essential to allocate a budget to reestablish the company brand to remind the market of the company’s continued existence, and also to give valuable updates on new programs, products and services.
Now:
Some small and medium-sized businesses have resorted to occupying less office space. Depending on the lease agreement, subleasing can help pay the rent, which can constitute a large portion of monthly expenses.
Future:
The long-term strategy may be to try and make the company more mobile. To work just as efficiently using less office space, hire an efficient workforce and use portable technology. Using open source software and other free programs and templates available online can also help to cut back on licensing costs and service fees.
Now:
Considering going into a cooperative or a joint venture agreement with another small or medium-sized enterprise may help quell further losses with the sharing of resources and ability to purchase in bulk.
Future:
Joint venture agreements may be beneficial in the long run in terms of sharing of ideas, processes, strategies, and other information helpful to both businesses.
Sometimes, the worst situations bring out the best innovations. Recessions that affect small and medium-sized businesses should be viewed as a means to improve not just the way a company works, but also the manner in which its managers and employees handle these challenging situations.