Thursday, 23 July 2020

Strategies to Face a Recession: What Businesses Should Know (Part 1)




Many businesses are still focusing on growing sales in this tough time. Coupa, a spend management platform however encourages us to save cost with their 10 secret strategies to deal with recession.

1. Really Monitor Non-Payroll Spending

One of the best ways to begin recession proofing any business is to get spending under control. Increased oversight on spending immediately begins to alter behaviour and deter a business from spending frivolously on items it doesn't really need or spending more than it must on items it does need. Understand all your non-payroll costs, and then you can start detecting and curtailing wasteful spending while continuing to fund the business’ many necessary expenditures.

2. Establish and Enforce Budgets

Without a budget, there's nothing to stop an employee from spending $1,000 on a new printer when a $500 printer would do. Without a budget, it’s too easy to rationalize the more expensive purchase and not examine the opportunity cost implicit. The best way to start is to review the last 12 months of non-payroll spending and set budgets at 10% below those levels. Make adjustments if needed.

3. Curb Non-Essential Spending

·       Delaying unnecessary purchases
Delaying common purchases like computer upgrades and office furniture can result in substantial savings.

·       Reducing employee benefits
Treating your employees well, paying them fairly, and providing health insurance plans are good business practices. However, extras may have be eliminated to stay within a budget and keep your business fiscally fit.

·       Invest in products and services that offer quick ROI
Seek out purchases that look to offer continuous and fairly rapid savings. Evaluate solutions based on total cost of ownership (TCO) not just purchase price. E.g. consider maintenance or upgrading fees before you purchase.

4. Get Rid of the Supply Closet, or Start Managing Inventory

Inventory costs money. An insurance company was once told that they “carried more inventory than a furniture store” due to all of the pre-printed paper forms they had at their small office. If you do find categories of goods that make sense to have in excess quantities, start managing them formally through inventory management. Track consumption patterns and set re-order alerts.

5. Negotiate Supplier Concessions

Usually, you can achieve greater discounts without making big bulk purchases all-at once, if it is by committing a certain volume over a given time period. Whether they'll admit it or not, many suppliers are quite happy to offer discounts across the board for a repeat business guarantee - especially if times are tough.

We will continue the remaining five secrets next week!


Reference:

10 Secret Strategies to Recession-Proof Your Business, Coupa


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