Welcome to The Ledger where we sum up the latest finance and accounting news and trends for you. On this week’s entry, we’re diving into the topic of cost containment solutions and what that means for companies today. Read on to see how to align costs with your business strategies, how to contain costs with your startup company, how to improve your bottom line with cost cutting efforts, and why reducing employee headcounts could be detrimental to organizations.
4 Questions to Ask Before Reducing Your Costs With the Best Cost Containment Solutions
If you’re a manager, the first thing that probably comes to mind at the thought of ‘cost cutting’ is layoffs. It makes sense, though – employees are the costliest expense that a company incurs. But before you go down that rabbit hole, ask yourself these questions.
Are there strategic trade-offs decisions that could reduce the cost of our business?
What 'tail’ of choices and costs come with our strategy?
How can work be redesigned to provide a solid basis for cost leadership?
Do I know what really matters to the customer?
The worst thing an organization can do is make blanket costs without any thought behind the strategy. And according to Paul Leinwand and Vinay Couto, “The best-run companies, in contrast, think of cost management as a way to support their strategy… they put their money where their strategy is, and continually cut bad costs and redirect resources toward the good costs.”
To learn more about reducing your company’s expenditures, read the full article on Forbes.com.
Ways to Eliminate Unnecessary Costs - Cost Containment Solutions
Starting a business is no easy feat. It takes patience, time, and most importantly – money – to make a company profitable. But what happens when your VC no longer funds your business, or you end up depleting your savings? Here are a few ways to reduce your expenses and ultimately, put money back into your pocket.
Lease instead of buying
Minimize overhead expenses
Hire only who you need
Secure a floating line of credit
Invest in insurance
Form partnerships and barter
Manage your time carefully
Read the full article at Forbes.com to learn how to remove unnecessary costs in your business.
How Cost Cutting Efforts Can Improve Your Bottom Line
We know that saving money is not a new concept. People do it for a variety of reasons – paying off debt, saving up for a new house or car, taking a vacation, and more. On the contrary, companies save for different reasons. According to Mike Wilson of Morgan Stanley, revenues are expected to exponentially increase this year due to cost cutting savings – and thanks to COVID, those numbers are steadily increasing. This concept is known as ‘operating leverage’ and if the market is any indicator, we can see this being a permanent change. So, will the economy ever bounce back from the devasting effects of the pandemic? Peter Tchir of Academy Securities thinks so. He believes that “it is going to be a year where it’s going to be great for the economy and OK for markets. The economy is going to lead the markets, which is the opposite of what has happened in the last decade.”
For more of an in-depth look at how cost containment strategies can boost your bottom line in this day and age, head over to CNBC.com.
Why Leaders Should Steer Clear of Headcount Reductions
The previous three articles have talked extensively about cost cutting and how to save money by reducing expenses. But what if companies decide against cost containment strategies and instead continued doing business as usual? That’s exactly what one outsourcing company, Moneypenny, is advising accountancy firms to do – because according to them, reducing headcount could cost you clients. And now that a majority of all companies have gone virtual, investing in digital platforms has moved from being a nice-to-have to being a need-to-have. Maureen Penfold, managing partner at Moore Kingston Smith, says that technology should be a priority for firms, especially amid a pandemic.
To learn why restructuring your organization could be bad for business, read the full article on AccountancyAge.com.
Lastly, if you're interested in learning more about proven cost containment strategies, make sure to head over here, to learn how to avoid the biggest mistakes and put together an actionable plan for cost-cutting within your organization.