There may come a time when you have to start cutting costs to ensure the business continues to flourish.
This is never an easy thing to do but it is essential if you want to improve cashflow and avoid accumulating debt.
With a recruitment company, there is no stock to worry about so, naturally, costs start low. The most important part of your business is your staff as they are the ones who are on the front line searching and securing the very best employees for clients. By providing great customer service, they keep the clients happy and bring in those contracts.
Bearing that in mind, if members of staff are continually failing to understand clients’ briefs or failing to find suitably matched people for the job, this is when clients will lose confidence in your company and will start to look elsewhere. Ensure you provide sufficient training and encouragement to your team and if there are any problems, address them straight away.
No matter how good your marketing campaigns are or how state-of-the-art your office is, if you don’t have the right people, your business will struggle. If you have the best possible team on board, you’re off to a good start.
One you have a star team in place, you should look to ways of saving money, whether it’s moving to smaller premises, budgeting office supplies or using in-house skills, like online marketing and social media, rather than outsourcing. It’s also very important to monitor daily cashflow to spot any non-essential costs – it can be surprising how many things you don’t actually need.
Here are a few ways to cut costs:
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Ensure you have a daily cashflow model so you know exactly what is going in and out every day. You’ll soon be able to pick out costs that not essential.
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Consider moving to a smaller office space in a cheaper area. This can hugely cut down costs.
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When petty cash needs collecting, go yourself. This gives you a chance to decide whether it’s actually needed and you can make absolute sure every penny spent is worth it.
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Review expenses claimed by staff members and decide which ones are necessary. Explain your reasons for taking this action if there are complaints.
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See if you can pay your accountants in monthly instalments as opposed to an annual payment.
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Ask your landlord if there can be any flexibility on rent. Instead of paying quarterly, can you pay monthly? This can help to ease the pressure. Landlords will likely want to keep you on so don’t assume they’ll say no if you ask.
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Make certain you, as a director, or the owner of the company agree to all and any purchases.
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Get as much advice as you can from friends and trusted mentors of the business.
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Consider using a factoring or invoice discounting company to improve cashflow. This is where you can get paid the majority of an invoice straight away when you create an invoice rather than waiting for a client to pay you.
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If you’re running up debts with HMRC, you may be able to have a Time To Pay deal arranged. This will let you pay back the debt you owe in affordable instalments of up to a year.
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Do you have a company car? Consider giving it back to save money for the company. You can save a great deal on your personal tax too.
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If you cannot afford to keep all of your staff on, however good they are, you may need to make redundancies. The Department of Business, Innovation and Skills Hardship Scheme can help.
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Buy anything you can online, like office supplies, as this is generally cheaper than elsewhere.
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Not everyone will like it but you may have to cut overtime pay to save money. Again, if there are complaints, explain the situation.
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Don’t forget, you can save quite a bit by looking at the little things, like turning down the office temperature slightly to save on heating bills. You could even cancel subscriptions to trade magazines – why pay for expensive magazines each month when you can get the inside scoop from free online blogs (like Undercover Recruiter)?
If your company is getting into serious debt, don’t panic. You will need to re-evaluate the situation, find out what your options are and go from there. Act as soon as you can and you’ll have a fighting chance at bringing your business back to life.
Author: Keith Steven of KSA Group Ltd has been rescuing and turning-around companies since 1994; he has worked for insolvency firms, turnaround funds and venture capital investors. He formed his own turnaround practice, KSA Group Ltd in 2001, and he is acknowledged as an expert in the delivery of CVAs for SME companies faced with financial difficulties. He is the author of the site www.companyrescue.co.uk.
