The key to effectively cutting costs comes down to communication
A few things can send your team into a bit of panic at work, and the main thing is the dreaded ‘cost-cutting’ conversation. As businesses continue to navigate uncertain financial times, it comes as no surprise that budgets are being continually revisited. But this doesn’t make the pill any easier to swallow…
When there is a feeling that a business is cutting costs, people tend to freeze in the moment and that's where it can damage the business. That’s according to Caroline Matthews, the COO at Koto Studio, a branding and digital agency, “Instead, it’s more about changing behaviour, rather than telling someone they can't do something.”
Deciding which costs to cut first
It’s no easy task. It’s hard to know exactly where to begin and which budgets can be trimmed first, without causing a ripple of panic or unfortunate events. "But when it comes to cutting costs, a holistic approach can be more beneficial.
Caroline Matthews, COO at Koto, explains, “‘Unnecessary costs’ is an unusual term. I think all costs should be looked at to see how important they are, how valuable they are to the business, and what their role is”.
“On a micro-level, you can look at expenses that are coming in from a particular person or for a particular event, and you can start to question what those things are. It all comes down to communication; what is this for? What is its role in the business? And what is its true impact? And if all those things are positive then they are a necessary cost. It’s just about being mindful.”
More often than not across companies, it’s usually the people-first activities that get the axe first. “You have to understand the impact of when you pull back expenditure. The obvious main cost that you would consider to cut is the ‘fun’ stuff, and that’s sad because people are the most important part of business, and ensuring they’re being rewarded is absolutely vital.”
Keeping everyone on the same page
As budgets require continual reassessment, there can be fluctuations in what your team can, and can’t, spend — be that hotel costs, flights or subscriptions. There’s a lot to consider, and a lot to keep your team looped in on when it comes to setting spending limits.
“In order to get any cost-savings adopted into the business you have to look at it from a macro-level first, then work down into the granular detail of how it's actually implemented,” says Caroline. “You need to work out exactly where those cost-savings are and give real guidance and a level of expectation around why these cost-savings should be implemented. Then go to the heads of those departments, and build out policies, and give people guidance and a level of guardrail so they understand.”
One way of keeping your people on the same page is by creating a bespoke expense policy. This way, your people are free to get what they need for work without having to jump through hoops seeking approval or justifying certain purchases. An effective expense policy will cover most ground ahead of time by detailing a set of rules and tips on where money can be spent. Not only does this keep everyone on the same page, but it helps to avoid any overspending mishaps.
How control trims unnecessary spending
To learn more about how control can play a vital role in cost-cutting, sign up for The new way of finance series to access Caroline’s complete lesson. Plus, additional lessons from four more forward-thinking finance leaders.
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