Even before declaring a nationwide lockdown, the COVID-19 has dramatically affected the business industry and the economy. As the virus makes its way across the globe, businesses and companies were forced to implement a cease of operations.
Their brick and mortar stores remain shut to help the government in the fight against the deadly disease. Inside this context, this will discuss ways to reduce spending further.
Running a business is a risky and costly venture. However, with the pandemic in place, it became 10x harder to run it and keep it afloat at the same time. Businesses, tiny and start-up ones, are taking the hardest hit during this crisis.
Without the big name and huge asset to back it up, small enterprises can choose to either adapt to the new normal or shut their business down entirely.
Here are smart ways to reduce spending and cut your business costs. Keep your establishment up and running even with the turbulent situation.
Ways to Reduce Spending Enumerated
1. Make an assessment
Before cutting any expenses or halting productions, analyze first your ongoing burn-rate and cash flow. Identify the sectors where your business is currently spending on; Look at the sector where spending money is vital and consider which ones are avoidable.
After listing down all of your fixed, variable, and periodical expenses, you can proceed to remove those with excessive and non-essential expenses.
Run efficient operations by reducing your cost without compromising your business's survival and the quality of your products.
2. Reduce your fixed and variable expenses
Your variable cost might be hard to reduce, especially for an essential establishment such as a food shop and convenience store. However, for a small clothing boutique, cutting your raw material cost for clothes production might just save your establishment. Level your variable expenses based on your market demand.
Another thing to cut back is your biggest fixed expense, which is your rent. Since every brick and mortar store is now closed, you can take your store online and utilize delivery services to accommodate customers. Then, propose a pay-per-use payment basis or a deferring payment for your lease.
3. Delay capital expenditures
If you were planning to expand your business or add new equipment, postponing it for a short while may do your business some good.
During a pandemic, money is tight, and the market is unpredictable. Instead of making large expenditures, you need to be cautious and save every penny you have. There is the right time for capital spending, and it is not amid a crisis.
4. Adapt to current market trends
Since everybody is stuck at home, the current landscape of every business's market is in the online world. Adapting to new trends may be difficult, but it is the only way to keep your company afloat.
Try offering your goods and service online. You can try online sessions, online shopping, or an online delivery service. This way, you can keep earning profit while also venturing a new business path that can be beneficial to your company when this is all over.
Harnessing virtual technology also helps in reducing your business costs while improving your time efficiency, especially in serving your consumers.
5. Review personnel expenditure
Cutting your human capital expenses might be the hardest part you are ever going to do. The good news is that letting them go is not the only option you have.
Since the product demand and operation hours have changed, you can lessen the workforce per day and have them work at intervals instead. If you can, adopt a work from home program to reduce rent, utility, and travel expenses.
6. Request for extensions and concessions
Do not run away from your creditors. Instead of waiting for a notice of disconnection or overdue payment, communicate with your creditors or suppliers, and propose a solution. Talk about your situation and negotiate on alternative payment transactions such as granting an extension or a deferring payment.
7. Get creative
Get creative and think of opportunities to stay relevant, such as creating a high demand product. Say you are a swimwear boutique owner with a lot of fabric materials at your disposal.
Use your raw materials at hand and manufacture personal protective equipment out of them. Make face masks, fabric face shields, and protective suits that people, especially healthcare workers, currently need.
Final Thoughts on Ways To Reduce Spending
If these seven ways to reduce spending are still not enough for you, we'd be more than happy to provide more input! It's important that we manage our finances well; we have to maximize our resources and spend our income wisely. Feel free to message us anytime. Annette & Co. will be more than happy to give you FREE expert advice on your spending concerns!