Amidst the historic economic recession caused by the coronavirus pandemic, many businesses went through the major financial crisis. Finance leaders and professionals were left with no other option but to consider cost-cutting. Companies facing financial downturns started taking the approach of cost-cutting without going through proper financial analysis. Such pressured cost-cutting may be a common choice by the businesses but it is not always the best solution to tackle financial problems.
Many businesses want to have a quick win instead of making long term strategies and plans. They look for changes and improvements in their current strategies which require minimal effort and at the same time adds value to their business.
Businesses can think of reducing their discretionary expenses which will not affect their business operations. Spending on non-essentials and non-critical projects can be put on hold as cost-cutting on this will have less risks. Another immediate action can be deferring the recruitment process, negotiating new terms with your clients and assessing your underperforming assets. Businesses should consider options that are relevant and easier for them to do and have minimum risks involved.
One of the most common corporate reactions in the Covid-19 recession was reducing their staff. Staff cost cutting can save your training costs and salaries. But in the long term this can be harmful as you lose your skilled employees. Companies who are honest to their staff about the financial health of the company and plan to put a short-term cut to the salaries which will be restored once the finances are back on track, staff also willingly cooperate in such scenarios.
However, finance leaders should avoid acting hastily and make decisions under pressure. Business owners should consider alternatives that do not affect their business operations. Finance leaders should look out for measures that reduce expenditure, weighing the potential risks and then take action accordingly.
Cutting marketing cost is another short-term cost saving plan but on a longer run it can affect your company’s presence in the market which can be more damaging. Maintaining your marketing efforts in the time of recession can definitely give an edge over your competitors. Keeping a good marketing game requires maintaining it on a longer run but this is where more brands lack at. In tough times, brands instantly cut off their marketing costs even when some of them can afford, this is the biggest mistake they make. It will take them much longer to bounce back in the industry at a position where they were before. Whereas, their competitors can take full advantage by taking over their position.
Different cost management approaches can be adapted according to your business requirements but the first and foremost step is to conduct an in-depth analysis of your company’s financial performance. You should never opt for cost-cutting on the basis of someone else doing it. Some approaches are suitable for others but maybe not for your business.
Post the coronavirus pandemic, one of the major focuses of companies should be on risk management. There should be proper financial planning, emergency funds, strategies to cope up with such an uncertain crisis in future. Pandemic have changed a lot of dynamics in which the businesses think, they have become much more careful in taking actions, got a better understanding of their business position and how can they make their company survive in tough times.
