CFO’s are stressing and stretching because of Covid-19. As the pandemic started a few months ago, most of the small businesses are suffering due to the cash crunch. Large organizations started to take control of cash reserves to prevent liquidity risks due to macroeconomic uncertainty.
According to a survey, small businesses have cash reserves of up to 27 to 47 days. While large organization cash reserves are enough to manage expenses until 6 months. It’s critical to keep up positive cash flow during the lockdown to manage solvency & sales snags. Forward-thinking CFO’s curtail non-essential expenses to stay viable post-pandemic and prevent downside risks for the business.
Check out a few strategic cost-cutting measures to cut superfluous expenses amid Covid19 as advised by chief financial officers in a survey.
Reach out to bank managers, credit unions, credit cards or other lenders to check if you qualify for forbearance during the crisis. Check if the EMI payments shall be suspended for a while or until further recovery without any deferred interest rates or fewer interests.
Delay payment to suppliers, landlords, and other utilities
Talk to landlords for reducing payments such as rents, utility payments, and suppliers’ credits or negotiate temporary relief to save on costs. Pay only for critical small-scale suppliers with good ratings to prevent conflicts on approval.
Freeze travel & entertainment expenses
Minimizing the travel for the most critical function eliminates the risk for employees and travel-related expenses during a pandemic. So, it is very crucial to cut costs associated with travel & entertainment and explore opportunities to remotely set up meetings, conferences to save on overheads.
Cancel leadership events/offsite
Set Up an emergency task force to develop an event contingency plan to discuss the implication of canceling or postponing all leadership events/off-sites. Reschedule the event based on multiple scenarios or engage through virtual events with a health and safety plan.
Delay CAPEX investments
Focus on canceling or delaying the capital improvement projects or renegotiate contracting terms on payment reduction or deferments for unused leased equipment, fleet vehicles, office spaces, SAAS platforms, software applications that are redundant and expensive at the current situation. Defer on-premise technology spend.
Reduce consultant/contracting spend
Talk to your consultants and contractors to pause services or close accounts temporarily. Explore free consulting services from SCORE or small business development centers, if required. Renegotiate the essential contracting/consulting services pricing to your favor as much as possible.
Start implementing the hiring freeze as quickly as possible to save on costs. As newly hired candidates wouldn’t be able to come to the office directly and get an opportunity to understand the process, people and culture of your organization at this time unless the job position is very critical at this time for your operations. The job advertising costs and other hiring process costs must be zeroed down with immediate effect.
Delay/freeze new hire offers
Don’t release any new hire offers until the pandemic situation normalizes to control new working expenses adding to your bottom-line. Delay the new hires or freeze the positions for a while at least till reopening of physical workplaces. Postpone new employee joining dates
Freeze/cut paid and social media marketing
If you are a B2B company, pause all paid marketing and affiliate campaign programs immediately and save on costs. As the international markets are severely hit because of Covid19 and there is still uncertainty continues. If you’re a B2C or e-commerce business cut the paid and social media marketing spend to control costs on branding & advertising of non-essential goods relevant to this situation.
Reduce/paused variable services
Pause all other variable services associated with costs to prevent using the resource time inefficiently and focus on high priorities.
Reduce excessive workforce on the bench through furlough staff to manage downside risks and save on costs with temporary leaves. Furlough pay or partial pay until recovery of the situation, so you can recall people until the next year if required.
Reduce working hours
To cope up with a decline in business activity, reduce employee work hours to retain employees, and avoid burdens associated with turnover as well as maintain productivity.
Stopped 401K Match
Temporarily suspend your 401 K contributions to address the sudden plunge in revenue for navigating through the economic downturn. It helps to avoid cash crunch and keep businesses viable and prevent employees from losing their job.
Cancel the contract with service providers
Terminate all the non-essential contracts that afflict your cash reserves until further notice.
Rescind interim/graduate offers
You can gain more control over your cash burn rate by canceling, rescinding, and repealing interim/graduate offers.
Remove product offerings
Stop all product offerings and giveaways for new customers to curb off the expenses at critical times and make sure cash flow is in control.
Divested part of the business
Step away from the divested part of the business and focus on core competencies to contain expenses
Recession Scenario Planning
Consider job cuts and plan recession scenarios later depending upon the vulnerability to your financial goals and cash reserves after audit and analysis.
All these cost containment strategies will make sure businesses keep up positive cash flow and control cash burn rate to flatten the curve during the macroeconomic uncertainty caused by Covid19. Leveraging all possibilities will allow small businesses to sustain against the downside impact.
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