10 pointers to manage your costs at this difficult situation

With the pandemic situation, the business has to survive. Getting the business, managing the expectations of the customers, getting the payment from the customers, making profit are challenging in the near future.

There may be schemes and stimulus announced by the government, banks may give finance to tide over the situation. But, we own the business and we are responsible for that.

While managing the sales and manufacturing are impacted due the pandemic situation, the costs remain. Let us see what best we can do to save the cost - if not avoidance, we can optimize the cost.

I request readers to comment on their thoughts and innovative way of avoiding/saving costs.

Here are the 10 ways to reduce your cost of operations

(1) Rent

• Negotiate with the landlord for 
• waiver for the period during lockdown
• reduction in the rent for a year - say 10-20%
• surrender a floor/space not needed
• Move from current premises to save on rent
• away from CBD, if that suits
• to a smaller premises
• Assess your space requirement
• we always take place keeping in mind the future plans. But now survival is important
• study says that productive space will be somewhere between 25%-30% of the total area.

(2) Electricity

• The cost per unit of commercial unit is higher. There may be rate slabs and increase for higher usage.
• Make sure that you use electricity only to the extent required.
• There are many ways, we can save electricity
• Use LED lights instead of the conventional CFL lights
• Switch off unwanted lights and when not required.
• Make sure the equipment and appliances are switched off, when not in use. 
• Do not keep the equipment in standby mode - remove the plug or switch off the power. This will save power.
• Look at replacing air-conditioner by Fans. I know it is tough decision. Survival is more important than comfort. Use dark curtains for office space, so that it remains little cool.
• make use of natural lighting
• Use 5 star rated appliances
• Go for roof top solar units - on operating expense model.   

(3) Discretionary expenses

• A strict NO. Do not get tempted to spend.
• Avoid some of the discretionary spends like travel, dinner, parties (can be celebrated once we come out successful). 
• Hold on to changing - unless it is critically required.
• Electronics : mobile, television, laptops, watches
• Furniture
• Painting - look at wallpaper, if you really need a makeover
• Car or bike

(4) Invest in essentials

• Make meetings to the extent possible through web - use free schemes from Zoom, Zoho, Google meet, Whatsapp, Skype etc.,
• invest in good web-cam, mic or headphone
• this will save fuel cost - with less travel
• saves travel time - you can spend on business
• Invest in good broadband
• Will take care of web meetings, emails
• helps in digital marketing
• Take insurance on goods etc., loss of profit, etc., which was given a pass. A small amount will save a lot at times of disaster.

(5) Invest in technology

• This is the time to invest in smart technologies like
• cloud space
• digital documentation - scanned document
• cloud accounting - pay as per your use
• digital attendance system
• cc television and recording equipment. We cannot afford to fraud/theft happening
• develop your website to enable online sale

(6) Process re-engineering

• You know your business better than anyone else. But we may over-look certain areas. Take advise from experts
• Improve on the efficiency by improving the methods or production
• Reduce your wastage/defects to ZERO.
• Reduce the time to convert the raw material to finished product
• Do not stock more than required : JIT - just in time
• Talk and listen to your staff. They can give better ideas to improve the processes.

(7) Preventive maintenance

• You cannot afford to invest in new machines. So, please take care of them by having a preventive maintenance.
• Machines do not break-down. We only maintain it incorrectly.
• Take AMC for equipment
• Insure your equipment and office

(8) Save on interest cost

• Try to reduce your interest cost by optimally using the loan facility.
• Look for subsidy or grant available - like export benefit. Talk to consultants
• Take more credit from suppliers. 
• Use platforms like TReDS to get money quickly
• Negotiate with your banker for lower rate.

(9) Outsource / SSC for accounting & compliance

• If you are a small organization, not only you get professional service, the outsourcing agency will also guide you on compliance, which keeps changing everyday.
• Risk of attrition will be taken care
• Real time reports can be made available through cloud platform
• If you are a group of companies - look at shared services center.

(10) Health

• Above all, take care of your health and your staff. This is most important. Any absence will have an impact on the business.
• Use Arokya Sethu
• Do physical exercises
• Take medical insurance for self, family and staff. They are critical for the business.

Incidentally, it was exactly 7 years back, I blogged on 10 ways to save your hard earned money - CLICK HERE to read it.

Again, please share your inputs also in the comments to the larger benefit of the society.