Time waits for no man, and in business that is particularly true; before you know it, two-thirds of the calendar year have gone. A survey of 500 bosses by Heathrow Express, right at the start of the year, found that 35% said they were losing sleep over challenges to their business. The report authors concluded that there would be an annual boost to the economy of £580bn if these problems could be resolved.
The two main causes of this insomnia? The future of the economy; and rising business overheads.
January 2016 – a time before the National Living Wage (NLW) and the vote for Brexit; two massive developments that small, medium and large size companies also now need to factor in when trying to maintain or increase their profitability (or, simply, to become profitable).
Insolvency experts Begbies Traynor reported that there were 59,608 businesses in the industries most affected by the NLW in distress even before its introduction – active in industries as varied as sports and health, hotels, bars and restaurants, retail, transport and logistics and food and drug retail.
Poor cashflow will undermine any business, and it is essential that a firm has a strategy to manage its costs in place. A sensible analysis of the costs a business is incurring relative to its business plan will determine which are vital to survival, which are discretionary and linked to business growth, and which are simply discretionary and expendable.
Once that review has been undertaken the key is then to get good value, making certain that the firm is paying no more than it should be for its essential goods and services whilst at the same time ensuring it has what it needs to effectively and successfully do business.
Finding value is of course only the start. Businesses need to remain vigilant and on top of both their expenditure and industry developments (don’t forget – water deregulation comes to England in 2017) after their review, because costs will simply creep back in again otherwise. In fact, 95% of simple cost reduction exercises fail because firms do not have a cost management strategy in place, with the result that all those benefits and savings initially identified and implemented slowly find their way back into the business.
Of course strategic cost management takes time, and expertise. If you have both, the resources to fully research available suppliers and tariffs and the determination and tools to ensure your costs are monitored on a regular basis going forward, you are well on your way to delivering a long-term and sustainable cost management solution for your business; to at least in part put your mind at rest.
If you don’t, it might be time to outsource this function to a professional firm of strategic cost management consultants.