Cutting costs, when done properly, can give you good long-term results. You can plan for these cost-cutting measures or implement them in response to a financial downturn at your business.
The Whitlock Co. discusses when cutting costs makes sense to improve your company’s long-term growth.
Deciding How to Cut Costs
When you decide how to cut costs, it’s important to weigh risks versus benefits and quick wins versus lasting effects.
Quick wins to save money can come from cuts to discretionary spending by trimming subscriptions, lowering your supplies, and stopping noncritical projects. These offer quick ways to save money without sacrificing the quality of your company’s core business model.
Streamlining your processes can make staff more efficient. While this might increase your current labor costs, over the long term it could save you money down the line. For example, you would improve your ordering by employing an automated online system versus traditional methods.
You might also see a temporary increase in employee workload until the new process settles in. You could have 20 employees doing the work of 25 for a few weeks. Again, your labor costs may increase temporarily with the planning phase and paying higher salaries until you decrease your staffing levels.
To Automate or Not?
Automation can certainly streamline your processes. While automation might replace parts of your workforce, lowering labor costs and streamlining processes could increase revenue because you add value to your services that make you stand out from competitors.
Here’s how growth follows automation, and how it might lead to more hiring at a future point. Your increased revenue means you have more business. When you bring in more business, you’ll have to hire more people to handle the additional workload.
For example, you automate certain financial tasks at your company. This saves your staff three hours of time per week to focus on other aspects of banking. As more customers see the value of your services, your company needs more customer service representatives to handle the load. You’ll have to hire more people as you expand over several months of sustained growth. In the coming years, you might expand further to include a second office because of the efficiencies you implemented.
What Not to Cut
Cutting costs to make your business more efficient may add value to your services. That’s why you need a robust sales process in place when you cut costs. You should maintain sales and marketing efforts, even during downturns.
Why?
Because other companies will probably cut sales and marketing costs. If you maintain your budgets for these two key aspects of your business, you’ll stand out from competitors as they decrease their spending. You might get more business during lean times because your company is more visible to your target audience.
How an Accountant Provides Cost Management Advice for Businesses
An accounting firm like The Whitlock Co. offers sound advice for businesses looking to cut costs while achieving long-term growth. First, we’ll look at expenditures, capital commitments, and liabilities. Then we’ll examine your company’s capacity for equity through investments, loans, nontraditional sources of equity, and renegotiating your current debt load for lower payments.
Our team might also look into flexible budgeting. This technique involves helping you understand your financial position among revenue, variable expenses and sales.
Can you change anything with regards to lowering your expenses? Can you alter the way you produce goods or services? Are there ways you can lower labor costs through outsourcing? The Whitlock Co. can help you answer these questions.
Contact The Whitlock Co. today, and we’ll start the conversation.
