The advent of the COVID 19 pandemic has brought about numerous challenges to an already complex business world globally and has reinforced the notion that businesses should "adapt". The growing need for businesses to operate efficiently and be agile has never been any greater.
Unfortunately, most businesses have resorted to reducing their wage bill by retrenching staff to ride the crisis. Although this could be viewed as an ideal cost-saving measure, this does not necessarily always translate into immediate savings (due to costs of retrenchment) or better performance in the future.
This default cost-saving measure of "reducing the headcount" in most cases could be a way of papering over the cracks as the real problems are never really addressed. Some typical challenges that businesses are currently facing are:
- Obsolete business models that are no longer relevant to the emergent\prevailing environment,
- Inadequate and complex business processes,
- Inability to innovate
- Bloated overhead costs and
- Consequently, cash flow challenges
The result of all these issues can be possibly summed up as:
- Inability to accurately allocate costs to products & services or determine the true cost of a product and service that a business provides to the market thereby leading to inaccurate pricing,
- Inability to identify which solutions/products and which customers are most profitable.
Consequently, strategic decisions taken by management are sometimes based on inaccurate information as businesses try to contain unrealistic overheads due to operating inefficiently.
Progressive businesses review their entire operational models and cost structures. An example of a solution that has been brought about by the Covid-19 pandemic that some businesses have adopted is the working from home dynamic. Prior to the pandemic, working from home was mostly associated with senior staff or employees in the fintech and technology industries. Despite working from home, some employers have appreciated increased productivity levels in some instances which have led them to rethink the traditional model of occupying large offices and adopting a more leaner approach that would only require skeleton staff at the office.
Embracing technology is key to eliminating cost as a barrier to entry, fixed cost is becoming less costly for example 3D printing is making the printing of components much cheaper, using Digital technology can cost a fraction of the previous manual costs, in our business we have moved to an electronic board pack for our client board meetings which is saved in the cloud, this had greatly reduced the cost of printing, binding and employee time.
Improved financial performance could be achieved by using advanced analytics to quantify, baseline and optimize cost savings. Our model will enable you to have increased control over your business performance, giving you the ability to make more informed decisions.
Originally published 17 March 2021.
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