The COVID-19 pandemic has wrought unexpected challenges on businesses worldwide in the form of shelter-in-place mandates and strict distancing rules. Unfortunately, some companies had to close indefinitely. For companies that remained open or will reopen following eased restrictions, cost-cutting methods are necessary to help re-establish a positive cash flow and enhance productivity.
For cost-cutting to be effective, small businesses need to create and implement plans that avoid adverse financial decisions.
From optimizing your daily business tasks to purchasing cheap printer ink, this guide offers suggestions on how your business can save money during this crisis.
1. Cost Reduction
Cost reduction simply means minimizing your outgoing spending. While many small business expenses are non-negotiable, including rent and utilities, limiting other expenses can help your company cope with a loss of business or productivity.
Cost reduction should begin with a review of your current financial situation. Use this information to create a realistic budget for the long and short-term. Then, focus on boosting your cash flow. Don’t get discouraged! Increasing cash flow can be challenging amid supply chain disruptions and limited customer activity. Reducing your spending can free cash that you can redirect to other areas of your budget.
Review any subscriptions you have with software and media services. Cancel or postpone anything that isn’t essential to your daily operations until your financial situation improves.
Administrative supplies are another necessary expense you can scale back on. If possible, switch to a mostly paperless office. Keeping digital files and managing invoices online is good for the environment and for your bank account.
Most businesses can’t go completely digital but can still save money by purchasing low-cost printer ink, reusable cartridges and recycled paper. You can find deals on the best remanufactured ink cartridges that cost a fraction of the price of brand-name ink. Don’t worry. You’ll still get quality prints.
Discuss the contracts you have with your vendors. Many wholesale vendors have also been hit hard by supply chain disruptions during the pandemic and need to retain customer accounts. Your vendor relationships give you leverage to negotiate better prices or account repayments during the crisis. However, if your vendor can’t meet your budget, it may be time to consider switching to a more affordable solution.
Refine your payroll expenses by encouraging your employees to work from home. This adjustment helps you save money on travel expenses, limits the number of office supplies needed and might allow you to move to a smaller space with lower rent. It also reduces the risk of COVID spread between employees.
2. Spend Management
You’ve probably heard: “You need to spend money to make money.” Spend management is about using money wisely and investing it in your operation’s vital aspects.
For small businesses with limited cash reserves, a business loan can give you the capital you need to get your business up and running again. There are many small business loan and grant programs available to companies that have been hit by the COVID-19 pandemic.
If you have already taken out a loan for your business, discuss refinancing with your lender. The Federal Reserve Bank cut interest rates to 0 percent in March 2020, making it easier for banks to give out small business loans. As a result, you could significantly reduce your loan repayments to get back on your feet.
To effectively manage your business finances, you need to review both direct and indirect spending. Examine business credit cards and expense accounts and take action to reduce unnecessary purchases.
Review and renegotiate repair and maintenance contracts with equipment suppliers. Often, calling out for emergency repairs is more expensive long-term than a preventative maintenance contract.
You may need to postpone conferences, team-building events and training seminars. Also, consider delaying planned expansion or research programs in order to leave cash available for essential and immediate expenses.
3. Operational Optimization
Each company’s needs are unique, and there are numerous recommendations about how small businesses can manage finances. However, the pandemic has changed the way small businesses in nearly every industry operate. While some of these changes may be inconvenient, others create opportunities to optimize your business processes.
Focus on customer service by producing the highest quality products or services possible. Make sure you are attentive to customer concerns. Your customers will often understand issues with delays or service disruptions if you can effectively communicate the problem. Post updates on your website and answer customer questions as quickly as possible. Consider implementing a live chat function on your site to address customers’ needs in real-time.
Use technology and social media to your advantage. If you haven’t already done so, set up a social media account on popular platforms, including Twitter, Instagram and Facebook. You can use these accounts to connect directly with your customer base, and you can often broaden your demographic to bring in new clients.
Tech-based communication software or apps are an excellent and relatively inexpensive way to manage and communicate with staff. Many online management tools allow you to integrate functions. Consider integrating payroll and time clocks with communication and file sharing apps to streamline remote work. These technologies will allow you to direct your time and energy to other areas of your business.
Many small businesses are tempted to cut costs by eliminating marketing programs. However, a thoughtful digital marketing strategy with optimized content can give you the exposure you need to increase sales. You can also implement customer-driven marketing using a points program for every word-of-mouth referral.
While you cannot control the ups and downs of the global marketplace, you can control certain aspects of your business. Cutting your costs, managing your spending and optimizing your processes are three effective strategies to keep your business operating during a crisis.