Layoffs not real answer to effective cost control

As businesses brace for a possible economic slowdown, they are expected to further slash unnecessary expenditure and bring down overheads to improve the bottom line. Trimmed down budgets and well-planned cost cutting initiatives can help create savings and optimise operating margins for companies that don’t have too many sources of revenue to look forward to, thanks to the global financial crunch.

Here are areas where businesses, big and small, can cut spending and create valuable cash reserves to tide over any impending crisis.

Realign goals: For example, the annual budget may need to be altered to cope with new circumstances, and expansion plans may be put on hold. Look for ways to release cash from capital. Unused/ high maintenance assets are usually the first to go in a bid to reduce operating costs and retain liquidity.

Cash requirements might also have to be carefully projected and closely monitored. Tighten conditions relating to cash and accounts receivables and negotiate for better deals with vendors and contractors.

Focus on work that counts. Fall back on your best, most dependable products and services, and aim to get more value for every penny you invest. Outsource non-essential processes if it will bring down costs and improve production and people practices to increase productivity levels and lower operating costs.

Go slow on hiring and layoffs. Going slow on hiring makes obvious sense, but layoffs are another matter altogether.

Although at first glance layoffs seem to offer a quick fix answer to cost control, the mid-term and long-term consequences of layoffs are disastrous. Look at your employees as assets, not overheads.

Train employees to improve their skills and utility ratio and acknowledge and reward deserving employees even if resources are scarce. This is the time for you to let your employees know that they make a difference.

Cut down on unnecessary costs and discretionary spending in areas like travel, entertainment, telephone calls and meetings. Tighten regulations and minimise cash advances. Institute stringent receipt requirements for all reimbursements. Offset expensive incidental benefits such as performance bonuses, high premium health benefits, stock options and legal assistance with other benefits that are easy on the pocket.

Conduct an energy audit. Even simple things like introducing energy efficient lighting, heating and cooling can make a big difference to running costs.

Ask employees for suggestions. Employees usually have a wealth of ideas, and tapping this powerful source can give the organisation some innovative and inspiring leads to keep costs under control.

Revaluate your strategy and decide on the how you are going tackle the situation. Revisit priorities and ensure that your team has a complete understanding of the contributions they are expected to deliver.

During a period of boom, companies often neglect to keep track of spiralling costs and wasteful expenditure. It may not have mattered then, but with economic challenges looming ahead, a little prudence will ensure that the organisation is able to sustain its effectiveness and profitability in the long run.