The cost of living crisis has taken its toll on businesses and their operations. No matter their industry or specialty, the cost of just about everything has increased meaning that there are fewer takeaway profits, and a higher risk of falling into bankruptcy and liquidation.
Making savings where possible can be neglected by businesses looking for an action plan to reduce their outgoings and continue to grow and scale their businesses. Unfortunately, some businesses have an unethical way of cutting their costs such as firing large-scale numbers of employees without notice and even outsourcing work below minimum wage to boost their profitability for greed purposes. There are good and bad ways to cut the running costs of your business, and you will benefit much more in the long term from handling your cost reductions in a cost-effective way that ensures the security of both your staff and the business as a whole.
If you are looking for ethical ways you can start to protect and build your businesses value whilst reducing outgoings, take a look into the following suggestions:
Review Your Current Budgets
Firstly, you must get a strong understanding of where your outgoings are heading, if they contribute towards a return on investment, and also the level of their importance towards the running of your business. This will of course be a time-consuming task, but this will highlight a lot of areas for savings and perhaps bring light to some poor financial decisions that your business has been wasting money on over the past few years. For example, you might have a £100 monthly budget for fancy coffee pods, when this could be replaced with instant coffee for the time being which will cost much less monthly. You should especially look into your direct debits on energy and utilities, as overcharging on these accounts can often go unnoticed.
Set New Budgets
Once you have a grip on what your current financial habits are, it is now time to set new budgets and spend time on your financial planning. These budgets must be following what you have available for each category of spending, without being unreasonably restrictive to the point where you will overspend on these budgets monthly. If you restrict budgets on energy too much, for example, this might be seen as unethical who are left in a cold office due to holding back on turning on central heating. Also, set your priorities, and create pots for the most important costs.
Cut Your Energy Costs
Since interest rates have risen to record heights, energy companies have increased their costs following this leaving all forms of energy extremely expensive. All businesses should be staying on top of their energy costs to make sure they are not being charged in unnecessary areas. It would be wise to review your current contracts and shop for better deals with fixed rates for a term that will offer a better price. Energy is essential, but saving energy is the key to better budgets and more profits.
Upskill Your Employees
When some businesses begin to struggle with financial problems, they are quick to jump to remove staff and place the responsibility onto existing staff members, leading to stress and a poor work atmosphere. If you want to save money, instead equip your employees with more skills that will add value to the business and lead to increased profitability. For example, if you are a dental practitioner who offers dental aligners, consider training the staff who carry out this treatment to also be trained in teeth whitening, and offer these services as a bonus treatment to entice customers.
Covid 19 for many businesses lead to many of their staff working from home, leaving their offices empty whilst still needing to pay the rent. Many businesses have changed their structure to follow a hybrid workforce, with some staff being office-based and others working from home. Consider renting out a smaller office space if you have roles that can be WFH, as a smaller office space will be much cheaper to rent.
These are just a few suggestions for cutting the running costs of your business ethically. Reputation is everything, and getting rid of staff and restricting the businesses running will have worse long-term negative effects than good ones. This is why it is always better to do things more ethically, to support the business’s success in the future once at a safe place financially.
Amy Jones is a freelance writer and enjoys writing about finance and ethical ways to run a business. She has worked with a number of businesses from cosmetic dental clinics to investment lawyers.