Maintaining close and tight control over the variable and fixed expenses is a critical part of maximizing profits and cash flow in a business. And this is especially true for business managers facing budget pressures, who are forced to embrace functional efficiency, while effectively managing all potential risks associated with their operations. Having said that, every business – regardless of the size or the field of operation- tends to face hard economic times, which may require cost-cutting in its operations to maintain profitability.
For instance, the impact of the COVID-19 pandemic forced businesses to take extra precautionary cost-cutting measures to remain afloat. While such emergencies are inevitable in the business world, it is advisable to avoid knee-jerk reactions in such cases. Business leaders and managers must ensure that a strategic prism in cost-saving must trump any ad-hoc urgency measures, as the manner used to manage cost decisions in such cases determines how well the business sustains its performance during a crisis.
But reducing operational costs and creating healthy business processes for business in countries like the UAE and KSA that lead to success does not have to be time-consuming. Rather, it requires business leaders to make smart business choices and decisions intended to minimize operational costs. Here is a primer on how they can do just that:
1. INVESTING IN THE LATEST TECHNOLOGY Using the latest technology can help businesses manage their expenses while taking their businesses forward. With the advancement in technology, businesses should invest in it to advance their efficiency and effectiveness in their internal operations and service delivery. For instance, although the cost of gas in the UAE, KSA, and other countries in the GCC is low, holding virtual meetings is one strategy that can minimize fuel expenses.
Furthermore, the use of free online payment platforms and services can help companies reduce their transaction expenses, especially when paying salaries. Free online payment services like Venmo and PayPal can be embraced by businesses for ease of making payments. Similarly, businesses can accurate their payrolls with time tracking that is GPS-powered. Using their mobile phones, employees can be required to clock in and out, and that information is recorded in real-time, leading to better employee tracking.
Furthermore, adopting modern technology can help businesses empower their employees at limited costs. Rather than organizing costly seminars, the use of technology can enable businesses to provide their employees with direct access to essential training resources for personal growth and development.
2. EMBRACING MODERN MARKETING METHODS Businesses can rely on modern methods of marketing to minimize costs. While it is not advisable to eliminate paid advertisements altogether, businesses can embrace cheaper marketing alternatives that can enhance cost-cutting.
Due to the communal nature of society in the Middle East, networking is one of the marketing strategies that businesses can explore in this region. This is because customers are likely to work or refer the product to their neighbors or relatives because they recognize and rate it highly. However, businesses should distinguish themselves in the market to stand out for a specific trait or product characteristic. Rather than paying outsiders to market their products, businesses should use their staff to increase product awareness among their families and neighbors.
Furthermore, businesses in these areas can capitalize on the use of social media to enhance their presence in the market. Social media is considered to have been the primary tool that enhanced the success of the Arab Spring in North Africa and in the Middle East. At the same length, businesses can exploit the power of social media by identifying the right platform to increase their online presence. However, this should be done through a well-structured plan and strategy to ensure that businesses remain genuine and connected to their customers. While these modern strategies work, it is important to try as many social media sites as possible to attain the desired cost-cutting levels.
3. LOWERING FINANCIAL EXPENDITURES Businesses should also lower their financial expenditures to minimize operating costs. For example, business owners should closely look at their financial accounts and insurance policies to reduce their business expenses. To achieve this, they can compare the various insurance providers and then request their current providers to match the market rates. That can enable them to eliminate unnecessary charges imposed on them by insurance companies for profit purposes.
At the same time, business owners can evaluate their insurance policies to ascertain whether they have duplicating coverage or are over-insured. Whenever possible, businesses can also consolidate their bank accounts and insurance policies to make them less expensive to manage. Additionally, businesses can avoid unnecessary debts by operating within their means.
For example, they can undertake a thorough cost-benefit analysis of every investment to ensure that it has a positive cost implication for the company. This can be enhanced through future forecasting where business owners can look into potential business expansion strategies and opportunities. Throughout these measures, the effects and opportunity costs that arise with debt payments on cash flow can be evaluated.
4. PROPER BUDGETING Creating a budget is another core driver of successful cost-saving within an organization. Budgeting is mostly perceived as a no-brainer whenever planning on reducing operational costs. Regardless of the business size, it is important to have a practical budget that can enable the managers to make smart financial decisions. This is because the budget gives a clear idea of how much money a business deals with in terms of income and expenses monthly. The budget gives the business owners a daily view of how business expenses can be reduced promptly and effectively.
At the same time, business owners can evaluate their insurance policies to ascertain whether they have duplicating coverage or are over-insured. Whenever possible, businesses can also consolidate their bank accounts and insurance policies to make them less expensive to manage. Additionally, businesses can avoid unnecessary debts by operating within their means.
For example, they can undertake a thorough cost-benefit analysis of every investment to ensure that it has a positive cost implication for the company. This can be enhanced through future forecasting where business owners can look into potential business expansion strategies and opportunities. Throughout these measures, the effects and opportunity costs that arise with debt payments on cash flow can be evaluated.
4. PROPER BUDGETING Creating a budget is another core driver of successful cost-saving within an organization. Budgeting is mostly perceived as a no-brainer whenever planning on reducing operational costs. Regardless of the business size, it is important to have a practical budget that can enable the managers to make smart financial decisions. This is because the budget gives a clear idea of how much money a business deals with in terms of income and expenses monthly. The budget gives the business owners a daily view of how business expenses can be reduced promptly and effectively.
To avoid common financial mistakes, financial management can be achieved through budgeting, which sets out the specific objectives and goals to be achieved and at what costs. Consequently, this enables the business owner to consult the budget when the work is in progress. Depending on the prevailing status as evidenced by the working budget, adjustments can be made progressively and that helps in cost reduction in real-time.
5. EVALUATING CURRENT CONTRACTS AND EXPLORING FREE RESOURCES Businesses can also evaluate their contracts and pursue free resources in their bid to cut costs. It is advisable for business owners to evaluate their businesses and change based on the market forces. For example, if the market tends to be soft, and there is limited demand for the products offered by the business, the owners can start looking for alternative suppliers of different products.
Similarly, if the business occupies a big space that is not utilized effectively, the owners can seek to renegotiate for lower rent and seek to downsize until demand rises up again creating a need for a large space. In addition to reviewing the existing contracts, business owners can seek free resources such as business networking websites for use to market their products. Plus, having a strong presence on social media can be a powerful advertising and marketing tool that can help businesses enhance their brand identities in the market, thereby attracting new customers.
