As businesses and corporations the world over put the struggles of the global pandemic behind, the battle for economic stability lingers. Now more than ever, business executives are dealing with a different economic downturn: impending recession.
It is apparent, but not enough attention is focused on the eventuality. According to a study, the global inflation rate has grown by 3.81% compared to the previous year. And according to the Bureau of Labor Statistics, the consumer price index for all urban consumers (CPI-U) has increased by 7.9% over the last 12 months.
These figures are indicative of an impending recession. The last recession in 2020 left several businesses inoperable, with Americans losing 20.8 million jobs. A possible recession is beginning to look like a matter of if not when.
It is essential as a business executive to take practical steps to manage expenses within your operations. And we are here to show you how.
Take Control of Your Business’ Cash Flow
One of the vital steps in managing your expenses in the wake of an economic downturn is to take charge of your cash flow. Most business executives ignore this until it is too late. The cash flow is the life force of your business. Thus, you should maintain an eagle-eyed view of it.
Ensure that your clients and customers meet their credit obligations to keep the cash flowing continuously into the business’ coffers.
Cut Down on Business Travel
Another area you might need to pause on is the expenses accrued from business travels (both locally and internationally). Before the pandemic happened, business executives approved huge finances to fund business trips, accommodations, meals, parking fees, gas, and other unplanned miscellaneous expenses.
Business travels are uneconomical as you prepare your business for an impending recession. You should instead opt for virtual meetings, which are cost-effective. It is better to invest in virtual conferencing software and tools that will benefit your business in the long run.
Trim Down Non-Essential Monthly Subscriptions
Have you ever subscribed to a music or movie streaming service that you end up not utilizing? Businesses battle with such expenses nowadays. It is vital to review all your business subscriptions and identify the non-useful or less used ones.
One might argue that the subscription fees are tiny compared to other operations that take a chunk of finances. But $17/month for a service that you do not need becomes $204 after 12 months, and when compounded per employee, this can get very expensive. When you have multiple needless services like this, it becomes a problem.
Carefully review all your subscriptions and remove the non-essential ones to reduce your overhead costs. This also includes data, wireless, and telecom expenses.
Renegotiate With Your Vendors
Another way you can manage expenses with a forthcoming recession is to meet up and strike better deals with your vendors and suppliers. Your vendors are probably overcharging you for products or services.
You need to identify the market price for that item or review prices from other vendors. You can then strike a favorable deal with your long-term vendor.
Your vendor will be willing to reduce prices instead of losing your business. It is essential to make your vendors feel like they are part of your business’ success. It will always inspire them to be flexible with charges on products and services.
We previously published an article on Market Price Myths and Why You are Overspending. You should check it out.
Reduce Office Space
You may have heard the term ‘hybrid office’ a couple of times before. It was an efficient business model designed to maintain operations while keeping everyone safe. Hybrid offices have become a significant part of the new normal in a post-pandemic world.
If you are looking to manage expenses, you might consider renting a smaller office space. Why? Continuing operations in a large office area come with several costs, including rent, water, energy, security, and other bills. And running an office full of employees during this period is ill-advised, as it would incur more overhead costs.
If a compact, hybrid office can do the trick, you should go for it. Then again, if you are spending too much on your office space, you can renegotiate your lease. Your landlord may likely cut back on rent, and you will save money to reinvest elsewhere.
Re-evaluate Your IT Department
Another area to manage your expenses is your IT department. While global IT may hit $4.5 trillion before the end of 2022, you should review your IT operations and consider trimming down the department.
With an impending recession potentially soon, your IT expenses may increase due to extended work-from-home options. Managing IT expenses beforehand can potentially solve problems now and in the future. You should take a look at our article addressing this right here.
Hire An Expense Reduction Consultant
An expense reduction consultant knows your business’s major and minor areas where you can reduce expenses. Using an ‘outside eye’ to review your business spending to identify and analyze unnecessary monthly costs will result in boosting your cash flow.
Expense To Profit has been doing so for several years, supporting small and large businesses to increase their revenue while reducing costs. Our strategies are customized to your individual needs, ensuring you maintain happy customers, retain top talents, and ascertain brand dominance.
Reach out to see how we can help your business today.