In this unique economic climate, where the volatility of the global markets is severely impacting all businesses worldwide, management must take decisive action in order to ensure their own business’ survival. Owners and managers must look at what techniques they can employ and changes they can implement to ensure that their business exists long enough to reap some rewards when this economic cycle turns. They need to be in the best shape possible to capitalise on new opportunities.
 
Such survival is not down to one key factor alone, but rather a proactive decision making approach; a cohesive vision within businesses and a desire to take advantage of the opportunities that will be available once this economic hurricane has passed. Companies must also make a commitment to provide timely communication to its stakeholders and its employees.
 
Fundamental to the success of any businesses is the control of expenditure. All businesses should ensure that they understand their spending and that they have accurate and timely information on the costs of each part of their business. Regardless of the nature or size of any business, owners and managers need to ensure that the financial information that they receive is reliable, timely and accurate. Basing critical business decisions on information that is outdated, inaccurate or incorrect will only result in that business facing further, possibly more significant, problems. However, decisions do need to be made without delay and with confidence.
 
Once owners and managers have an accurate picture of the company’s financial position, they must then implement a programme to ensure that costs are measured, monitored and, where possible, cut. A KPMG survey of more than 400 businesses worldwide found that nine out of 10 cost reduction programmes failed to achieve their targets. Why? The same research showed that drivers were not clear, cost strategies were too cautious and cost discipline was not embedded in the company’s culture. This article therefore seeks to provide some practical considerations that all businesses can implement to improve their chances of surviving:
 
Embed a cash culture – Embedding a cash culture, where staff is aware of the need to shed excess costs at all levels of any organisation, must originate from management. The culture itself must be communicated and reiterated; reiterated and communicated. Each and every member of staff in any organisation must take responsibility for seeking ways to reduce spending whether that be outsourcing, offshoring or using shared service centres. Businesses that are unwilling to change or adapt will soon realise that the current economic climate will be unsympathetic to such stagnation; they will simply flounder.
 
Re-examine your procurement – Are you really getting the best deal? It is imperative that you speak with your suppliers and ensure that you are getting the best possible price and terms. It is important to think outside the box, to consider whether early payment would earn you a discount; better still, whether cash up front would increase that discount. In a climate when all businesses are facing the same economic problems, it is important to remember that your suppliers may also be under pressure and may be reviewing the way they do business. The key to making this work for you is regular re-examination of terms between you and the supplier and sustaining an open and regular line of communication.
 
Don’t sweat the small stuff – It’s important to recognise that quick wins may not be a misnomer. Stopping the coffee you supplied for your staff or downgrading on the quality of their break biscuits will not help embed a cash culture. Make sure that staff understands why changes are happening and more importantly that they actively buy-in to any changes that will affect them, not just at the end of the month, but during their working day. Employees are one of a business’ most precious assets and should be treated as such.
 
Ensure that you give the same level of focus to your costs that you would to your revenue and cash flow. There is an opportunity for you to streamline your business and cut the fat, not the muscle. There was never as great a time as any to do that as now.

Lucy Henderson, manager, KPMG Advisory T: 815.2638 E: lucyhenderson@kpmg.ky.
 
The views and opinions are those of the author and do not necessarily represent the views and opinions of KPMG. All information provided is of a general nature and is not intended to address the circumstances of any particular individual or entity.