For CFOs, controlling costs is a core function. When cuts are required, CFOs often look to the "usual suspects," such as renegotiating supplier/vendor relationships, eliminating positions that aren't driving sufficient growth or exploring automation solutions. But what can CFOs do about controlling costs when those low-hanging fruit have already been plucked?
Getting the Ball Rolling
Rather than focusing on across-the-board cuts in all your business areas, which may sound fair on the surface, look instead to strategic cuts that will support better-performing areas. You might even see fit to reallocate additional funds into business areas that are growing, while cutting costs in areas that are offering less return on capital expenditure.
For example, a McKinsey & Company report describes a global retailer that needed to cut costs during the recent recession: "It began by working out which activities were essential for a distinctive retail experience and which would be most easily damaged by cost cutting." While the retail organization restructured and cut redundant positions, it also invested more money in growth areas. As McKinsey explains, the retailer "invested to improve the returns from its promotions by increasing the number of people who tailor events to the needs of local markets," which led to increased revenues.
You could also take a crowdsourcing approach and survey your staff for their take on cost-cutting strategies. They may have unique perspectives on opportunities to cut cost, so getting (and possibly incentivizing with a cash bonus) their feedback can be a great starting point for any organizational discussion about non-traditional, cost-cutting ideas.
Staffing Cost Reductions
When cutting staffing costs, your goal is to maintain as much productivity as possible. This will take both creativity and flexibility. For example, promoting more remote working, where employees don't need to occupy often-expensive office space but instead can work from home, can both reduce cost and maintain productivity. According to a report from Global Workplace Analytics, not only do remote employees work more hours, but an organization that allows an employee to work remotely for just half their time can save $11,000 per year in overhead and other related costs.
The growing gig economy, with the easy availability of independent contractors, can also help you enhance flexibility and reduce costs related to employee-related benefits and overtime pay. The 1099 worker/independent contractor can act as a ready supplement to your staffing needs when your workload rises.
As a Money article explains it: "the trend benefits companies, which are seeking more flexible work teams and the ability to scale staff levels up and down quickly. As the gig economy expands, companies are finding that they can tap specific skills and build blended workforces," all while helping better control their employee-related costs.
Cutting Travel Costs
According to the Global Business Travel Association, business travel spending will reach $299.9 billion in 2016. With the dizzying array of technology supporting remote communication, however, you can communicate with your stakeholders without the need for expensive travel.
According to an article in Entrepreneur, "The average cost of a domestic business trip is $949 per person, while an overseas trip costs $2,600. Businesses using online tools and software to communicate and collaborate virtually are better prepared to forgo costly business trips in favor of cheaper, more efficient alternatives." It's a good idea to have clear criteria in place to determine whether expensive business travel is the only available option, or whether more inexpensive, technological options such as video conferencing might do the job just as well.
Cost Cutting in Sales
Sales is another area for non-traditional cost cutting. Entrepreneur reports that CFOs can find savings opportunities through automating sales processes and by implementing powerful customer relationship management (CRM) systems. In addition, promoting greater collaboration between the marketing and sales departments in the realm of lead generation can be a big driver of enhanced cost efficiency. "By deploying your marketing team as an effective ally for sales, closing deals will happen at a faster pace than ever before," according to Entrepreneur, which will result not only in improved bottom lines, but boost your top lines, too.
Once the tried-and-true cost-cutting measures have been exhausted, CFOs have to get creative to cut costs while maintaining organizational productivity. By looking to employees, growth areas, technology and cross-departmental partnerships, CFOs can find cost-cutting opportunities that also serve to keep your organization running full-steam ahead.
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