Is cost cutting the answer to improve finance management?

 

From the perspective of a business consultant; while a business is built on the basis of an Infinite number of external and internal factors, the main one that can help kick start any business is finance.

The idea of saving a penny whenever possible does seem wise but practicing the same belief with

Changing circumstances and needs might get you in a tough spot.

Let’s list out 4 different types of cost cutting measures that are possible when trying to improve a company’s financial health and performance. These measures will be listed as follows:

1. Reducing the total costs of producing goods:

Yes! This seems like a feasible option. Minimizing costs of producing goods could help you save to a major extent but let’s dig a bit deeper.

Over here, we have to be careful while maintaining the balance between cost and quality, it’s better to pay a cent extra than lose quality. In this modern era of competition and easy access to media, it becomes tough to keep standing tall.

Pros:

Reduced costs lead to reduced prices, leading to a bigger audience resulting in a surge of sales.

Cons:

It becomes tough to come up with new strategies to maintain the reduced costs without compromising on quality. There’s a very big risk of your competitors copying your strategy and gaining the same benefits. Another thing to watch out for would be maintaining the surge of demand because without them your profit margins that are already thin might hurt your finances (among other factors).

2.Saving by reducing manufacturing costs:

In order to reduce your manufacturing costs, you need to carry out an accurate audit of your costs. Leave no stone (or file) unturned, know your debts, administrative costs, insurance, rent, office supplies, etc. to start right. Decisions on matters like raw material cost and/or alternatives to them, quality control, labor, updated machinery, logistics, different suppliers, etc. are most crucial.

Pros:

Increased efficiency due to new machinery, maximum utilization of inventory, scalable opportunity, reduced costs through competitive suppliers, substantial amount of concession in cost rate due to long term association with the suppliers, you save money and time by eliminating excess time consuming methods in the production cycle, reduced energy consumption, better quality control, reduced shipping costs, alternative raw materials.

Cons:

Financial setback due to underestimating or overestimating costs, faulty audit leading to more, Reliance on sole supplier leading to internal issues.

3.Cutting costs in marketing and sales:

Marketing in these times is a fickle thing. One day you’ve invested in the most obvious mediums and the other day there’s a new app or marketing trend out there. Thorough research is needed on ways of getting the best results. With Print, Digital, Outdoor Marketing, brand ambassadors, advertisements, the list and the endless costs never seem to cease.

Pros:

Your marketing is effective and draws in more leads/sales, you manage to cover your
advertisement expenses and enter into a profitable state due to image branding, you are
recognized as a trusted and well-known brand, and we obtain more organic ways of attracting
leads.

Cons:

You could end up paying constantly for campaigns and or/ other mediums of marketing despite no results, cutting costs on marketing could affect your brand image, competitors might have an advantage over the situation due to a bigger budget.

4.Cutting back on staff expenses such as salaries, bonuses, and benefits:

Here we must tread very carefully, our human resources are the basis of all operations running smoothly. Evaluating could not only be time consuming and tedious but also a risky affair. For. E.g. skimming off a percentage of even 10 percent is enough to send the employees on edge. However, if done through proper consulting, the right decision might just be what’s needed for the business growth of the company.

Pros:

Efficient work performance, reduced cost due to optimized work schedules, accelerated productivity due to incentivized performance.

Cons:

Employee Dissatisfaction, panic within the Company due to the fear of loss of human capital, the human resources might start applying in other companies and you might lose out on good candidates, hiring new candidates along with the painful recruitment process where you end up training the new personnel from scratch could cost you time and money.

With proper business coaching and the right decisions not only do you save on your finances but also gain a deep understanding of dealing with circumstances in a sound way. Your approach would gain momentum and change in a way it captures all perspectives pointing towards your goal; making your goals turn tangible.

Large businesses have always been faced with the challenge of solving business problems, contact now Business doctors.