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Saving a business in the face of cost pressures: a guide

6th Jun 2019
Brought to you by
downlaod

The Access Group provides integrated business management software.

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Cost pressures can arise for a business in all kinds of contexts. The problem may be internal to the firm, such as a drying up of revenue.

Or there may be some kind of market change: the cost of labour could rise dramatically, for example, or a new government-issued regulation could make a key part of your supply chain or production line suddenly double in cost overnight. As a finance leader, this is your time to shine – and it’s also time to think long and hard about how to deal with unexpected additional cost pressures.

Understand the scale of the problem

It’s true: without full and accurate knowledge of what exact problems the business faces, it’s impossible to adequately address the issues thrown up by an environment of cost pressures. In order to get to this kind of sophisticated understanding of the problem, you’ll need to have an effective data management tool in front of you.

By using a tool that draws together real-time operational spending information from across departments and automatically forecasts future spending plans based on this, you’ll be able to grasp what’s happening well in advance.

Choosing a cloud-based data tool is also a good idea, as it means that everyone across the organisation can access up-to-date figures on organisational finances – saving the finance staff team’s time and creating a prudent spending culture to boot.

Difficult decisions

Once you’re armed with the correct information, you may find that the situation isn’t quite as bad as you first feared. Alternatively, you may find that the situation is worse than expected – and that difficult decisions are needed. The scope of these decisions is likely to vary from firm to firm, but it’s probable that they’ll include hiring freezes, redundancies, halts to infrastructure projects – and more.

Some finance leaders might choose to make this sort of decision instinctively rather than on the basis of data-backed evidence. But this isn’t the right approach. When presenting your plans for retrenchment to the C-suite, you’ll need to be certain that you have the facts and figures behind you if you want your ideas to be given legitimacy and be taken seriously.

For a strategic finance leader, meanwhile, this is an opportunity to assess which staff functions are the most productive – and which salaries are providing the best return on investment.

Prevention is the best cure

When your immediate crisis is over and the balance sheet is looking a little healthier again, it’s now time to think about preventing the next crisis. It’s rarely ever wise to immediately begin spending a lot again once finances are under control. Instead, you should implement a plan of cautious spending rises and targeted, restrained hiring of business-critical staff – in line with the forecasts generated from your data. That way, the cost pressures issue is unlikely to arise as much in the future.

As a finance leader, an environment of cost pressures is never pleasant. It can spell a whole host of consequences, ranging from difficult decisions about your staff teams to the scaling down of big projects. In your role, it’s important to ensure you know the full scale of the problem – and that you can make rigorous, data-backed claims.

Our Finance software packages are excellent for helping businesses that face cost pressures. Learn more about how to make the most of them.