Sales have started to fall, the default rate is high and the bills keep coming in. In an attempt to reverse the situation and gain some extra breathing room, the strategy of most finance professionals at this time is to cut costs.
But is this the ideal solution?
Not always. Ideally, cost cutting should be a planned initiative within the organization and not done in a moment of crisis. The chance of making a decision that will cause losses in the medium and long term is albania whatsapp data high when acting in this way and can have serious consequences for the smooth running of the operation.
Discover the main mistakes made when cutting costs:
– Act based on the 'heat of emotion'. Do a careful budget analysis before cutting all the expenses that you consider extra at this time.
– Not planning to improve costs. Don’t wait until the rope is around your neck to conclude that the rent is too high. This is an analysis that should be done in advance. Changing rooms from one moment to the next can result in much higher extra costs with renovations, hiring an architect, moving, etc. The ideal is to always evaluate each scenario and have a plan B for each situation.
– Laying off employees just to reduce the payroll. Layoffs that are not planned in advance can cause more complications than improvements for the company. Before taking such action, you need to have designed the process for replacing that employee, calculate the severance pay, analyze whether their role is not strategic within the company, etc.
– Reduce product costs. For example, producing a car with air conditioning is more expensive than assembling a model without this accessory. However, buyers prefer vehicles with air conditioning. Therefore, it would be a big mistake to cut the cost of this equipment at the time of production. This would result in a drop in sales.
– Outsource your core business. Outsourcing is truly one of the best ways to reduce costs and maintain quality. However, you need to know what to outsource. A fast food chain, for example, should not outsource the production of hamburgers. This is the heart of its business.
– Look at the cash flow and not the result . The cash flow will always reflect what is happening in the company today. Therefore, it is necessary to analyze the result , as it is from this that you will have a medium and long-term vision.
And don't forget: to improve a company's costs, it is essential to have a strict budget linked to strategic planning. This is what will make sense when making a decision.