Cost Reduction Strategies For SMEs
During tough economic times such as these businesses can be faced with the need to reduce costs to remain competitive, maintain profitability, or even to survive.
And whereas it is necessary to respond to these needs with appropriate measures the truth is that short-term, unplanned cost cutting is often not sustainable – and can come back to bite you.
Where possible, it is better to mitigate the need for short term cuts by adopting a long-term strategic approach to cost control.
First, a couple of tips:-
1. Involve your employees
Experience shows that cost control is most effective when employees are involved in the process and a culture of cost awareness spreads throughout the business. It is important, when establishing or reviewing cost control procedures, to ensure your employees are fully informed and have an opportunity to add their opinions. Some businesses encourage employee participation by offering incentives and rewards for cost-cutting initiatives.
2. Start with the biggest costs
Generally, it is wise to begin by looking at the biggest costs first. Clearly, a saving of 1 per cent of £100,000 is much more significant than 1 per cent of £10,000. But though it is largely true that if you look after the pounds the pennies will take care of themselves, there is something to be said for keeping a close eye on small costs as well, especially if it helps to raise awareness of cost control among employees. Full article