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Lessons from crisis savings, or reduce costs wisely

Despite the crisis, life does not stand still, profit continues to exist and you still need to earn money.

How to approach a crisis from an economically competent point of view? The postulates of the economy say that “it is necessary to revise costs, reducing them.” This will bring greater benefits than trying to make more money. Top managers know the secrets of how and how to save, and what costs are best left at the same level.

Lessons from crisis savings, or reduce costs wisely

First, consider the most classic, traditional ways that many people know about and many resort to them:

1) revaluation of the budget with a reduction in cost items;
2) review of planned payments and expenses.

What payments and expenses are most often reduced during the crisis?

– this is the cost of training,
– expenses for advertising and marketing,
– the costs of selecting and searching for new staff (by the way, this phenomenon has its own name – hiring freeze),
– maximum reduction of all kinds of current expenses (travel, transportation, clerical expenses, as well as part of the social package, like free tea and coffee in the office for all employees),
– savings on the payment of bonuses and bonuses,
– appropriate reduction in the number of companies (reduction of orders from outsourcers, freelancers, as well as a reduction in staff),
– the costs of corporate events, teambuilding and other entertainment events at the expense of the company,
– cost reduction due to the search for new suppliers with more affordable materials and lower prices.

These eight points are the main and most common. The vast majority of managers and directors stop on the list and do not even try to “dig deeper.”

If we consider the business in the long term, then a deeper analysis is necessary.

Lessons from crisis savings, or reduce costs wisely

Before you start analyzing, building perspectives and starting to act, you should try the easiest way – fast-tracking – look for the most expensive article or several articles in the list of expenses, reduce and enjoy the result. But such an approach is dangerous due to the lack of effectiveness analysis, ignoring the forecasts of consequences and the lack of analysis of the medium and long-term prospects.

Put it in the “long box”

Another step that helps reduce budget items is to look at absolutely all the articles with the questions “How much does this need to be done now?” Or “Can this be postponed to a later date?”. If you get the answer “yes” to the last question, you can safely transfer the spending to subsequent periods.

Short term strategy

After a long-term budget analysis has been carried out, it is time to start short-term expenses and analyze the schedule of the next planned payments.

Now is the time to make a decision to increase accounts payable (of course, unpleasant, but what to do? Everyone is spinning the way he can!). A list is compiled of companies for which payments will be delayed, and a series of negotiations are being held with customers.

In addition to the above options, you should remember about a number of organizational points that will help significantly increase the efficiency of cost savings.

1. Strengthening accounting and liability

Stop trusting your employees absolutely thoughtlessly and uncontrollably. It’s time to start counting time, money, labor and cash.

In most companies, management works only half the force, and all attempts to control in a “quiet” time fail, because people do not understand why additional control is necessary.

In a crisis, the introduction of such a system of responsibility will not be so unexpected for staff, and the results can greatly delight the manager.

2. Introduction of KPI – quantitative indicators of effectiveness.

Each employee is personally responsible for specific expenses at his / her work site, and his initiative to save money should be taken into account in the form of a bonus to wages.

Lessons from crisis savings, or reduce costs wisely

For those who want to save money in accordance with all the rules, there is a list of methods of intellectual saving, which allows not only to cut down the main cost items, but also to consider the work in the long run, trying to “not splash out the baby with the row water.”

1. First you need to correctly prioritize. It is not necessary to cut the expense items guided only by the numbers in the report. Try to look at the problem more broadly and find the least secure savings items.

2. Projects should not be closed, but frozen so that at any time there is an opportunity to return to the implementation of past work.

3. Invest in promising projects. It is not necessary to think that in a crisis it is only necessary to save money – the right investments will help not only save money, but also increase it.
Try not to lose interesting chances, even if it seems that saving is a priority.

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