For businesses, there are two routes to get out of the coronavirus pandemic – increase sales or lower business expenses. The sad story is that businesses, more often than not, believe that the road to greater sales and low expenses starts from employee layoffs.
At a time when 49% of Americans were already living from paycheck to paycheck, the direness of the current situation has brought the job market across domains and businesses crashing down.
What separates forward-thinking businesses from their unstrategic counterparts is how they strategically handle their expenses while maintaining a market presence which is prepared for the post-pandemic era. To that end, let us look at the five ways businesses can do cost-cutting while maintaining their brand presence and keeping employee layoff as the last resort.
But before we head on to looking into those parts, let us guide you through an analytical study that would have to be done in order to best ascertain the impact of coronavirus on industries.
How to navigate this uncertain climate?
- Conduct internal audit
Start with performing an internal audit to start the cost-cutting process. Identify and rank items on the basis of essential to non-important and then run monthly reports to validate your findings. This will help you with seeing the business expenditures in the plain sights and then cross-check them with the business priorities in order to find scope of cutting costs.
We recommend that you take a fresh look at the utilities, cost of goods, rent, employee travel, advertising etc expenses.
- Gather an understanding of tax deductions
Businesses have to incur a series of expenses for staying in business. It is important to know which expenses can be reused as an advantage in the month end through the mode of tax deductions. The deduction although varies greatly from one industry to another, it can be a great way to better the business’s bottom lines. This however would require you to completely understand and maximize your business deductions to then lower the tax liability.
- Relook at what is important
With more than half of the world being moved to work from home mode, there are a series of operational expenditures that can be revisited by businesses. Some of those are:
- Workspace expenses
- Advertising and promotion
- Office software and equipment
- Recurring orders for break room food and office supplies, etc.
When looking at the operational expense, you should think how lean your business can get.
Now that we have looked at the homework you should do to prepare for the COVID-19 pandemic in terms of cost saving, let us look at some of the ways to cut down business expenses without laying off any employee.
1. Provide telework facility to lower the overheads
A number of businesses, in the wake of coronavirus have shifted their businesses online – and for all the good reasons, By enabling employees to work from their homes would mean that you can bring down the overheads such as utility bills, rent etc while giving the team a lot more flexibility and autonomy with their everyday activities.
Flexi work plans, across domains, have proved to better employee productivity and boost their mental wellbeing. When you add the probability of saving costs in the mix, it becomes a win-win situation for the businesses and employees alike.
2. Lower down the staff hours
There is no employee in the world who would enjoy getting their hours cut back but it is any day better than having no billable hours at all. In case you can no longer keep the entire team of employees on a complete wage system, you can think of lowering their hours. Through this mode, you will be able to keep them on the payroll when lessening the outgoing expenditures temporarily.
Example, in case you have two people in the HR team who work from Monday to Friday, you can have one person working from Monday to Wednesday and a second employee from Thursday to Friday. Following this, they can be kept on rotational shift.
3. Note if you are JobKeeper eligible
As a part of the government’s recent $130 billion support plan, the eligible employees would receive $1500 every fortnight for every employee in the roster. The SMEs which have lost over 30% of their revenue as compared to the year prior to it, the employees should be working in the company for a minimum of 12 months.
4. Think of talent loaning
In case your work has dried up and you cannot even afford to retain the employees on a part time salary, talent loaning can be a great option. In the coming months, a number of businesses are going to be inundated with work and would seek to hire employees promptly and swiftly.
Through talent loaning, you can provide them with your team of experts. Meaning, you will not have to worry about their super or wages, while the employees would be able to gain new skill sets without the fear of being out of job.
Another way to go about this can be changing the teams. In case there are some domains which are a lot busier than the others, transfer the less-busy teams’ employees to busy teams. Beside keeping the business going, this can also help in cross-skilling the brand.
5. Cancel subscriptions and services
In case there are any recurring subscriptions and services in your company like internet, telephone, or cable services, you would want to cancel the services until the social distancing is over.
You should talk to your vendors and ensure that you can safeguard the subscription rates so that you do not end up spending more amounts by cancelling them.
6. Save on the parking costs
With the employees not coming to the office anymore, you should consider negotiating an abated or reduced parking costs. In case your landlord asks you to pay for a specific amount of spaces, you should consider requesting them to waive the requirements when you are not in the office making use of the parking space.
In case you pay parking through a vendor, you should consider talking to them about lowering or removing the parking space on a temporary mode. In case you pay monthly, you can let the space go till the time social distancing is in motion. However, ensure that the space will be available for lease when you are ready to come back to office with your entire team.
7. Cancel and seek refund on events booking
All the in-person events have to be cancelled in the current time and as far as the pandemic would last. It is a good option however to ensure that you have a refund option in place for the events that you would have planned in the coming months.
Ensure that you look into all the contracts that you must have signed with the caterers, venue hosting company, or vendors to note their refund policies. Even if there isn’t any, it can be a great thing to reach out to the event parties.
8. Think of affordable marketing plans
Businesses should cut back on their promotion expenses but this does not necessarily mean that they must lower their promotion efforts. It simply means that they must look for affordable ways to maintain their marketing presence during this crisis.
Here are some of the ways you can achieve this:
- Promote through PR – entrepreneurs, in the current time, can get publicity from the PR companies by offering them – media members and journalists – to serve as their source to insider insight into how the pandemic is affecting them and their industry.
- Double the cheap marketing efforts – email marketing and social media marketing are both considered to be highly effective yet cost effective marketing strategies. Businesses can invest in their practice through minimum homework and monetary investments.
- Host video workshops – online workshops and video conferencing have been soaring ever since coronavirus has been on a high mode. Customers, bored at home, are seeking entertaining, valuable content.
- Donate and volunteer – businesses can donate services, goods, and money or volunteer to assist the coronavirus relief practices. Although volunteering should not just be for marketing efforts, in fact, it should be human betterment focused but your business can take advantage of the visibility that it gets you.
9. Look into cost-effective partnerships and practices
Businesses must spend money to grow money – it is a well-known fact. But it is time for exercising frugality. Some of the ways businesses can achieve that is by:
- Moving sales online – the time has come for businesses to move their business online. Digital marketing is a lot more affordable than media buys and print marketing. The move to online can lower the marketing and overhead costs which offer a high amount of revenue.
- Changing service providers – while it is deemed best to invest in a hot-shot digital agency, it is best to find a digital partner who can offer the same quality service at half the cost.
- Relooking at the technology stack – there exist a slew of free and cost-effective alternatives to all the leading software technology stack. There are a number of companies that have started expanding their free versions to help businesses save money.
10. Get rid of the non-important spendings
During the span of the coronavirus crisis, businesses must aim to be as lean as possible. Being lean would translate into cutting down the non-essential spendings and even cutting-off the non-essential operations. Here’s some ideas around it –
- Minimize travel – although social distancing norms have put restrictions on most of the business travel, there remain some cases where traveling is still necessary. Businesses must investigate if traveling is necessary for their employees and then find ways to cut down the expense.
- Reduce energy consumption – it is not a secret that energy efficiency tends to save businesses a huge amount of money. Now would be the best time to invest in LED lighting or thermostat. You can even look into other alternatives like switching off the lights, reducing temperatures in office, and recycling to lower the costs.
- Return leased equipment – you should look into the facility of returning unused leased equipment which can even include the fleet vehicles. Businesses must take this time as one which can be used for suspending repayment or returning equipment.
- Lower the office space – having office spaces can be a costly affair in the current time. What you should try out instead is opt for coworking spaces. You can even check with the landlord if they can cover the utilities expenses on a temporary basis.
- Seek loan payments suspension – businesses can contact credit unions, banks, and small business lenders to check if payments can be suspended. There are banks which might allow suspension of auto, small business and loan payments for temporary span of time.
Elimination of expenses is a great way for keeping businesses operative during the entire coronavirus period and for some time after but what is the amount that they should cut? While the conventional wisdom says as much as possible but you should also save money for avoiding the risk of losing the market share.
What we recommend is conducting proper cash flow projections to know how much money has to be saved and what is the amount that can be readily spent. These projections can help companies forecast revenues for anywhere between a month to a year and compare them with the projected expenses.
The parting words.
Here were the ten ways that define the ways you can cut down the business expenses during the coronavirus crisis. As you must have reckoned, all the ways that we have mentioned are inclined towards ensuring you don’t have to take the layoff route. For a business to sustain this period and survive the recovery period, it is crucial that they emerge as an employee beneficiary company.
Laying off employees should be in the utmost end of your list of steps to take to strive through the coronavirus period.