How to Cut Business Costs Without Laying Off Staff
It is common for most businesses that are experiencing decreased sales or negative revenues to reduce workforce by laying off staff.
A layoff is when an employer suspends or terminates a worker or group of workers for business reasons, like downsizing and management restructuring.
While it helps a business set itself up for an optimised profit margin, it can also negatively affect the organisation through increased turnover and decreased customer loyalty. Worst, it causes emotional distress to the staff who have been removed from service.
Losing many employees is also expensive as the business will need to allocate funds for recruitment and training. Some experts claim that replacing a team member who makes an annual salary of $30,000 to $50,000 can cost up to 20 per cent of their salary.
Because of this, laying off staff is usually a last resort in cost-cutting.
The following are alternative cost-cutting measures that companies usually consider:
1. Applying for JobKeeper Payment
Businesses that have suffered an ongoing significant decline in turnover because of the coronavirus pandemic can apply for the JobKeeper Payment, a scheme administered by the Australian Taxation Office (ATO) to support businesses and keep more Australians in jobs. Originally due to run until 27 September 2020, the program has been extended until 28 March 2021. Read more about the JobKeeper Payment scheme here.
Under the program, an eligible business or not-for-profit organisation will be able to provide wage subsidy to their employees working. This allows companies to retain their workers and use their money on other aspects of business operations, like product development and marketing.
2. Taking out a business loan
Businesses that aspire to reopen or grow can get business financing instead of cutting down its workforce.
A business loan is a type of financing intended for business purposes. Offered by banks, credit unions and online lenders, businesses are usually approved if they have a business plan, positive cash flow, and good credit score. Collateral is also required to secure the financing. These include equipment, buildings, accounts receivable, and inventory.
While banks typically grant business loans only to profitable businesses that have established at least around two years in the business aside from the requirements mentioned above, online lenders usually have less rigid criteria for approval. For this reason, online lenders often cater to small businesses and startup companies that seek financing.
3. Auditing business spending
Doing an audit of business expenses on a regular basis can help owners keep on top of their spending and investigate the "little" discrepancies that often get missed in the daily hustle and bustle of business operation.
By uncovering mistakes in the billings, businesses can save a potentially significant amount of money once the issues are resolved.
Business owners also gain a better understanding of where their money goes and if the funds are used according to the business plan.
Auditing also helps identify the most important aspects of the business operation that requires more money. This helps business owners allocate their funds smartly.
Business spending generally include:
- Utilities, including building rent or mortgage
- Credit card or loan payments
- Regular expenses that are not critical for operations
Once the expenses are identified and audited, business owners can easily track the unnecessary spending and start making cuts without downsizing the workforce. They can also create and adapt a plan for better budgeting.
Since auditing can be tedious and time-consuming, it is smart for businesses to invest in a bookkeeping service or hire an accountant who can regularly, monitor and report on the company's financial statements.
4. Minimising recruitment cost
One smart way of minimising business costs due to high employee turnover is investing in the employees' professional development. This includes providing a good on-boarding program, great compensation and benefits package, and fun working environment that makes the workers feel welcomed and "at home".
Employees are likely to stay in an organisation where they feel valued. Aside from rewards and incentives, they also seek opportunities to advance. Businesses that offer education and training will not only help strengthen the skills of their staff. They also provide an opportunity for the staff to grow within the organisation and be promoted to higher positions that give them a sense of security and fulfillment.
5. Utilising low-cost or no-cost marketing methods
Businesses that are going through a financially rough time can tap into the power of marketing to bring in more customers and boost sales.
There are many marketing strategies that do not require too much money. These include:
- Social media. Regularly updating posts on Facebook, Instagram and other similar sites not only encourage customer engagement but also increases brand awareness and reach. With more followers come more potential customers. Moreover, maintaining an active social media presence also promotes the business's network growth.
- Email. Regularly sending newsletters and other email alerts can keep your audience connected and informed about any company updates.
- Special Discounts and Coupons. This classic way of attracting customers still works because everybody wants to save money on their expenses. A limited-time 5% discount on a product can attract more customers, which lead to more sales.
- SEO. Businesses that have websites can optimise their online presence without spending money by regularly producing new blogs with SEO-friendly keywords and implementing various SEO techniques.
6. Adopting digital business solutions
Going digital can save a lot of money that's wasted on papers and ink.
Paperless office solutions include using:
- Cloud-based applications for communication and collaboration, like Basecamp and Slack
- Digital payroll system, like Xero and MYOB
- Office software like Microsoft and Google Suite
- Virtual meeting apps like Zoom, Google Meet, and Skype
Utilising these digital business solutions also allows employees to efficiently work from home, which cuts down office expenses like utility bills and cleaning cost.
Taking measures to reduce business expenses in unavoidable. Fortunately, this can be done without laying off staff. By implementing a smarter approach to business operations and efficiently managing funds, the talented employees are retained along with the workplace efficiency, productivity, and strong company culture.