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Top 7 cost considerations to maximise financial stability

COVID-19 has changed the shape of many UK businesses. And we’d be naïve to think the unchartered waters have subsided.

We now find ourselves in the next phase which – while far from straightforward – does present the opportunity to take back some financial control, especially when it comes to procurement decisions.

That’s because certain cost-cutting exercises were made virtually overnight at the start of lockdown – and most out of necessity. However, as we rebuild our workplaces of the future, it’s important to think about where you restart your spending – or not!

1 Control the cost gate

Perhaps unsurprisingly, when the COVID crisis first hit, many finance professionals had to go to extreme measures to keep organisations afloat. The real key now is ‘Controlling the Cost Gate’ as many of the historic costs try to creep back into the business.

Some of the questions you should be asking are:

•    What approval processes are needed for old costs to re-enter the organisation?
•    Can you place some simple but effective barriers to entry for some of these costs
•    Are all these costs essential?

Try to involve other key stakeholders in the ‘controlling the cost gate’ conversation too, as this could become core to your purchasing mindset – if not your wider organisational culture – moving forward.

2 Maximise home working

While the office vs homeworking debate continues, it’s clear that the traditional workplace has changed beyond recognition.

At the start of lockdown, many HR professionals predicted the end of the physical working environment, although some experts have continued to encourage employers to maintain at least a degree of flexibility for colleagues who do not wish to work remotely on a permanent, full time basis. It may therefore not be the ‘death of the office’, but it appears to certainly be the birth of change – and a hybrid workplace looks most likely, moving forward.

3 Manage human resources

It’s a testing time to hold HR responsibilities.

Mentally, some colleagues may still be struggling with the aftermath of self-isolation, home schooling, social distancing, furlough, risks to job security, health-related anxieties and possibly even the loss of loved ones. And while employers shouldn’t be expected to ‘fix’ everything, there is a need to provide a supportive environment in which colleagues feel safe.

In the current turbulent world, it may also be timely to consider if you can be more flexible and efficient by using outsourced resources for different functions. Advantages of outsourcing include:

•    Access to more expertise, when you need it
•    Cost savings, if managed correctly
•    Flexibility in changing times

In short, perhaps the time is right to open your mind beyond ‘the way you’ve always done it’, providing you think about the opportunities – and any potential risks – relevant to your own business.  

Read the full guide > Your New Normal

4 New workplace environment

Irrespective of the future of the office, some organisations will still operate within a physical working environment. Manufacturers had to quickly ensure their factories became safe in the COVID world, for example.

There are numerous new obligations to comply with to keep colleagues safe, including:

Sourcing PPE for employees

This will represent a new area of procurement for many buyers, however experienced, and it is crucial to understand the price versus quality balance. 

Ensuring continuity of supply

More production units are increasingly coming online, so try to avoid committing to long term agreements as prices may fall when competition returns to the market

Staggered working hours

The safety benefits of this approach are clear, but a 50% increase in operating hours could result in a 50% rise in operating costs.

Reliance on technologies

While video fatigue was widely documented, lockdown proved that field working can be effective. Sales teams may not need to physically meet customers’ 100% of the time.

 5 Review and simplify your supplier base

Following an extremely difficult time for the supply market, most are now investing heavily in approaches that will recover or further build on their market share. This means you have a great degree of buying leverage. However, a decision to switch suppliers should naturally be made with care, as enticing prices right now may not reflect their commitment to long-term service levels, for instance.

When going to market:

•    Ensure you are as clear as possible on your requirements
•    Be prepared to sacrifice some potential saving in exchange for a more flexible contract
•    Try to separate the negotiator from the relationship holder

Don’t forget, an awareness of the pricing and contracting options available in the market will strengthen your position.

6 Decide, implement and monitor

When it comes to the actual execution of your refreshed procurement strategy:

•    Implement it as soon as you can, as unrecovered cashflow is really the same as a cash leak.
•    Acknowledge that innocent mistakes may happen, on both sides, when it comes to implementing new contracts. Be ready to monitor invoices for an extended period of time.
•    If you’ve retendered, keep a close eye on price creep as the new supplier beds in over the first six months.
•    Constantly monitor your ongoing requirements. There will be opportunities to continually optimise supplier arrangements over time, and it’s important to monitor suppliers’ financial performance and stability if the crisis peaks again.

7 Change the culture

Finally, consider your organisation’s attitude to managing costs. The best short and long-term results come from embedding a real cost control mindset within a business, and as you find your ‘new normal’, there is no better time to rethink your procurement savviness.

To ensure cost control has a defined place in your culture, download the full guide below.  

Your New Normal – read the full guide

To mark the new collaboration between OfficeTeam and Auditel, we’ve prepared an in-depth guide to steer you through the coming months.

Your New Normal

TOP 7 COST CONSIDERATIONS TO MAXIMISE SUCCESS

This guide expands on the information above, giving you greater insight. Read about the 7 key steps to maximising your financial stability in the coming months.

Find out how to;

✓    Control the cost gate
✓    Maximise home working
✓    Manage human resources
✓    Create a safe working environment
✓    Review and simplify your supplier base
✓    Decide, implement and monitor
✓    Change your cost-management culture

Download Now

Nobody has a crystal ball to predict what will happen next, so a degree of alertness remains crucial. But there are certainly some ‘quick wins’ to be had when it comes to rebuilding cash reserves, strengthening balance sheets and satisfying your board.

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