Seven Cost-cutting Moves in Tough Times
Drastic times may call for drastic measures. For some entrepreneurs facing a dwindling revenue stream and escalating costs for supplies and materials, it may be necessary to take some preemptive action. This might be the only way for the company to stay afloat until the economy turns around.
Naturally, you should consider any cost-cutting measures carefully, despite the gloomy outlook. Although employees may be relatively understanding of the situation, you do not want to risk losing your most valuable performers. Keeping that in mind, here are seven ideas that might make sense for your business.
- Switch to a four-day work week. In effect, this enables you to reduce your company-wide payroll by a total of 52 days for each employee. In some cases, workers may actually prefer this type of arrangement, especially if it eliminates day-care expenses for parents of young children.
- Add a summer vacation. Unpaid furloughs have been proposed for government workers, so why not for your firm? If you have to cut payroll in order to avoid layoffs, you might as well give your employees a week off in the summer when they can enjoy a wide range of outdoor activities. Hopefully, staff members will return from this break rested and ready for work.
- Consider voluntary pay reductions. For example, if each employee’s salary is reduced by just 1%, it may save a significant amount of money without irreparably damaging morale. At the very least, you may have to enforce a salary freeze for the workforce.
- Suspend 401(k) matches. It is important to encourage employees to save for retirement, but fiscal responsibility is a greater responsibility. After temporarily suspending matching contributions to your 401(k) plan, you can reexamine the company’s financial picture at the end of the year.
- Shut down PCs. It is often ignored, but having employees turn off their computers and monitors at night—and especially over the weekend—can cut the company’s utility bill. Alternatively, have your technology expert configure the power settings to power-down PCs so the process is automatic.
- Eliminate or reduce overtime. At this point, your company may not be able to afford to pay time-and-a-half wages. Unless there is an emergency, send your nonsalaried employees home at the usual quitting time. In fact, you may find that employees will become more productive during regular working hours.
- Expand year-end holidays. At many companies, very little gets done between December 24 and New Year’s Day. If you do not already shut down your operation during this time, consider treating the week as an unpaid vacation.
Of course, you can expect to encounter some grumbling or even stronger resistance if you are forced to implement some of these moves. But the future viability of the company may be at stake. Consider other cost-cutting measures that would be applicable to your particular industry or profession.
For more information on this issue, please call Anita Abrol or Tom Shade at 810-238-4617.