Author: Clint Sporhase, Vice President, Business Banking
The coronavirus and associated social distancing measures have hit small businesses particularly hard. According to the U.S. Chamber of Commerce, one in four small businesses have had to temporarily shut down. Given the fact that many small businesses don’t have large cash reserves, it’s essential that they reduce costs where they can.
By practicing these cost-cutting best practices, your business may be able to save some of its cash reserves and be better prepared to return to business as usual once the pandemic has subsided.
The pandemic has put a strain on supply chains and your business may be looking for new suppliers to give you access to the products you need. It’s important when bringing on a new supplier to review the quality of the materials before purchasing. Additionally, if you are bringing in products from other countries, you will want to know how the pandemic is impacting freight and supply chains in those nations as well.
If your supply chain is stable, now may be an ideal time to re-evaluate your product needs. During the pandemic, you may not need to purchase as many materials as you normally do. Additionally, when trying to cut costs, it’s worth seeing if you can renegotiate with your suppliers. These businesses are also dealing with a crisis and it’s in their best interest to help their customers remain profitable. When renegotiating, it’s key to communicate the value your business brings to the supplier. For example, does your business provide them access to a stable customer base or a growing market? It’s also smart to ask your suppliers if they offer early pay discounts that you may take advantage of.
Due to the widespread economic impact of the pandemic, many service providers, such as utility and insurance companies, are offering temporary discounts or payment deferrals. It’s never a good feeling to fall behind on paying your bills, but if your business is struggling to survive, it is worthwhile to call your service providers to see if they are offering any assistance. Your business may also qualify for assistance programs through your financial institution.
Evaluating unnecessary expenses to see where you can cut back is a good exercise year-round, not just during a financial crisis. This may include leased equipment that isn’t in use, travel budgets, bonuses, software expenses, office space expenses and more. You should also re-evaluate your budget for the remainder of the year. Do you have any capital improvement projects planned that you can hold off on or expensive marketing initiatives that you can re-evaluate for less expensive marketing tactics? For example, social media is a great and inexpensive way for small businesses to promote their products and services to customers who are now stuck at home. You can learn more about how small businesses can use social media in my previous blog post.
If your business model allows it, having employees work from home is a great way to reduce overhead while keeping your staff safe during the pandemic. By having employees work remotely you’re saving money on utilities, janitorial services, coffee and water expenses, supplies and more. However, it’s key that your employees have all the tools they need to do their jobs successfully when working remotely. In addition, remote workers need to feel engaged with each other and connected to what’s happening with your company.
If you manage your payments processes with paper checks and file cabinets, switching to electronic payables and receivables can save you time and money. Not to mention that using paper-based processes during the pandemic is difficult and potentially risky if you’re having to physically deposit checks or having to drive to multiple locations to print and sign checks.
In these difficult times, many businesses are finding unique ways to cut costs and adapt their business models to remain successful. If your business is struggling to reduce expenses or pay bills during this difficult time, talk with your financial institution to see how they can help.
At FNBO, we have a community mindset and as the coronavirus continues to impact us in new and significant ways, we want you to know we share your concerns. We encourage you to follow how FNBO is responding on our website.
About the Author: Clint Sporhase leads FNBO’s efforts to serve small business owners. Clint has 25 years of sales, marketing and strategy experience.