High costs can damage a company in many ways, reducing its profitability and investment potential. In addition, they soften the level of competitiveness of the company. It is therefore important to know good cost-cutting strategies.
Rather, it should be made clear that cutting costs is not easy. Someone always finds themselves hurt and complaints tend to occur. In that it is not, from the outset, it is necessary to take Communicationclear with the team and explain the importance of the cuts to be made.
We understand a lot about this topic and want to help you. That’s why we’ll clarify 12 cost-cutting strategies for successful implementation in your company. Keep reading!
The Importance of Cost-Cutting During a Pandemic
Teh Pandemiccalled Covid-19 provided a global crisis and caused several losses for the business. The economy has suffered, after all, the countries needed to save their lives, and the population has been left without the opportunity to go out as often as ever. At the same time, the consequences came: consumption decreased, mass layoffs occurred, incomes fell, many projects were dispersed.
Therefore, it is extremely important that companies at the moment put in place a cost-cutting strategy to survive this crisis and be able to go through it without further loss. Unless the necessary measures are taken, many companies may not be survivors, especially micro, small and medium-sized.
However, organizations can choose strategic solutions to maintain a balance in their business. That is why in the next topic we will cover some practices that may be important during this period. Don’t make it!
How to reduce costs in the company? See 12 Strategies
Check out below 12 strategies to reduce costs in the company:
1. Analysis of the company’s processes
Before all the cost-cutting methods we will consider, it is very important that they start with process analysis. Thus, you can check how they currently work for the company, how much they require a budget, among other issues that help determine the origin of the costs.
Thus, you can find out what waste is, what are the necessary improvements and what can be reduced without losing quality. After all, by mapping processes, you’ll have a broader understanding of the entire organization, contributing to long-term cost reductions and greater impact on the business.
2. Separation of strategic and non-strategic expenditures
Some costs are really good for the company as they help close new businesses and improve daily efficiency. This is the case with investment in marketing or integration New technologies. They are called strategic because they allow for more financial benefits.
On the other hand, there are costs that are necessary solely for the maintenance of the company, and which do not add much value. Examples include tax, electrical or rental property costs. Yes, they are important, but they are certainly not strategic for the company.
So, as a first recall, in turn, take the opportunity to list all your expenses. Then rate them as strategic or non-strategic, depending on the level of profit offered by the company. Thus, you will immediately have a systemic idea of the possible cost reduction.
Strategic costs help your business to be better than competitors and achieve justified positions in the market. So it’s hard to just cut them. It is recommended that you reduce investments or set higher return on investment (ROI) goals.
In the first case, make small reductions, up to 5% or 7%. The marketing budget, for example, can be 5% lower and better used. This is a small reduction that does not affect the budget of the industry as much and helps in the profitability of the business.
Another tip: maximize efficiency. Assess how current strategic investments can generate more returns from investments, with the same financial resources or even with lower resources. To do this, Goalscomplex ROI.
4. Reduce non-strategic costs
As much as possible, reduce costs that are not strategic. Some trivial and unjustified costs can be completely eliminated. Other just have to be reduced to have access to the reality of the company. The goal is to make the architect a compact business.
A good example is the tribute. Being framed in an inadequate tax regime can cause you to have more expenses than you do without generating any benefit. So sit down with the company’s accountant to assess what taxes can be cut.
Other core resources, such as electricity and detergents, can be significantly reduced from 25% to 50%. For example, call an electrical operator to see what changes might reduce monthly electricity consumption.
5. Set a monthly spending limit
Many companies have a real non-controlling monthly spending limit. Since no one knows how much you can spend, use your consciousness to set that limit and eventually exceed what would be ideal. To change that, it’s simple: have a spending cap.
Meet with company executives, especially in the financial sector, and assess the trajectory of spending over the past few months. What were the costs? Was that enough? Then set a ceiling that directs future costs, something between 5% and 10% lower than in recent months.
Tell all employees about financial changes. Explain that everyone will have to adapt to a greater or lesser extent. Then align the guidance to promote reduction in their sectors by eliminating non-strategic costs in the first place.
6. Negotiations with major suppliers
One of the least painful ways to reduce costs is to negotiate with suppliers. If you can lower your purchase costs, you will have a higher sales margin and enjoy a more profitable business. The key question is: how to hold these negotiations?
First, assess whether you pay a fair price. Explore how much your competitors are paying for the same product/service. Also estimate how much other providers charge for the same product/service. The goal is to get more information before trading.
Then invite your provider to talk. Get a personal participation in the trade, have manual data and set a cost reduction target of 2% to 5%, for example. If you can’t negotiate, consider switching suppliers.
7. Keep the team lean
Wages are a huge source of expenditure. In small companies, staff costs easily amount to one third of the accounts. In service providers such as schools or aesthetic clinics, wages are 50% or more of expenses.
This is why you need to make the most of your employees and make sure everything works well on the watch. Good steps are setting individual goals, monitoring performance and stimulating more modern leadership.
However, the most interesting thing to choose lean team. Create small and competent groups to achieve good results. Reward this command based on the level of daily delivery. This will improve productivity and reduce staff costs.
8. Look for qualified professionals
In times of crisis, many companies prefer to lay off employees. However, dismissal also has a financial impact on the organization. Therefore, it is important that managers use effective strategies in the selection and selection of qualified professionals who truly meet the needs of the business and which correspond to the culture of the company. So the speed Turnoverwill decrease and therefore the cost of layoffs as well.
9. Revaluation of benefits offered
Reassessing the benefits currently offered to staff may also be a cost-cutting strategy. The health plan, for example, is one of the largest investments in people management. So you can revise the proposed plan and cut costs without harming employees.
During a pandemic, in situations where work has become remote, the company can suspend the transport voucher and reduce the cost of moving employees to the company.
10. Bring the team to know
If a company wants to cut costs, it is important that it engages all employees in this process. Tell the team about needs and encourage savings methods, such as shutting down equipment, although not used, avoiding waste materials, etc.
The organization can set cost-cutting targets and yesin the future, some were most involved in this mission when the goal is achieved. So let them know about the current situation of the company and make them involved in organizational tasks.
11. Develop cost-cutting planning
One thing that can’t be left out of these practices is planning to cut costs. It can be used to set goals, goals (monthly, semi-annual or annual) and more assertively outline strategies that the company will use. Use the analysis of the processes mentioned above and plan all the necessary steps.
In addition, it is also important to include a financial plan. Thus, the company can predict future costs or a possible drop in cash flow. Thus, the needs are identified, and you can learn the best time to execute each strategy. In addition to providing more continuous monitoring, evaluation of progress and dealing with unforeseen events with flexibility.
12. Invest in good management software
The technology also reduces costs. This allows you to automate many tasks, allowing employees to focus on what is strategic, while machines take care of repetitive procedures. It also reduces the number of errors and problems in the office.
A good example is Personal department software. This simplifies and automates some of the tasks of wage control: vacation, distribution of holes, contracts, communication with employees and so on. It’s, of course, reduces the cost of paper, engraving and even possible labor lawsuitsthereby reducing unwanted costs.
As you can see, there are different cost-cutting strategies. The classification of costs and the setting of the ceiling are the first steps. There is also a need to have technologies that make everyday tasks more flexible and assertive, such as digital HR software. This will reduce costs, increase productivity and build a successful business.
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