In times like these, every business leader is looking for new ways to keep their outflow of cash to an absolute minimum. Between an economic recession and the prospect of another surge in cases of COVID-19, companies need to be sure that none of their hard-earned money is going to waste.
Bad advice and outdated notions about saving money are widespread and hard to detect, making it difficult to know which path is the right one to take. Reducing your expenses often requires taking a few risks on your part, and it’s crucial that the risks you do take are the right ones for your business.
Mistakes are natural, but when it comes to saving your company money, you can’t afford to make too many of them. When it comes to balancing the books, here are a few common slip-ups to avoid:
1. Going it Alone
Business partnerships can often feel like more of a liability than an asset — if a closely associated firm goes under, what will happen to you? In tough times, however, going it alone can be even riskier. Without a network of allied organizations to back you up, you leave yourself more exposed to potential downturns than you should be.
Banding up with other companies to form a group purchasing organization or a research-sharing alliance can give your company just the edge it needs in today’s market. The collective buying or knowledge power of several businesses can produce big returns for your company while gaining you some key allies in the process. It can be tempting to go solo on your quest for savings, but doing so could cause you to miss some lucrative opportunities.
2. Relying Too Much on Freelancers
For small businesses, the temptation to gravitate towards freelancers is an obvious one. Over 40% of the American workforce now consists of freelancers, giving you a larger and more skilled group to choose from than ever before. While freelancers are highly effective for short-term projects or one-off jobs, using them as a crutch can end up costing you.
In the long term, more specialized and skilled permanent employees will be able to do the tasks you assign out to freelancers more efficiently. A full-time salary and benefits are big expenses, but the long-term savings you get from them will be more than worth it. Freelancers can help things run smoothly early on, but you need to grow your permanent team in order to truly save down the line.
3. Thinking Short-Term
New research is published every year showing that short-term thinking in the business world does more harm than good, and yet C-Suites continue to maintain their focus on the next quarter. If you try to save with a short-term mindset, you’ll maintain extra cash today while setting yourself up for failure down the line.
Cutting down on marketing or scaling back one of your teams might improve an account sheet, but what will the effects be a year from now? Growing tomorrow means investing in growth today, so don’t plug cash flows that may contribute to your business later on down the line. Perform some in-depth cost-benefit analyses of various aspects of your business before pulling the plug on any of your major operations.
4. Sticking with Old Tech
New applications, tools, and platforms are everywhere today — but the cost of adopting them can be significant. Businesses often feel trapped by their old technology because adopting new platforms would be prohibitively expensive, but relying too heavily on your old tech can cost more than you think.
More than 90% of customers would consider switching companies if the one they were dealing with was using outdated technology. On top of that, the cybersecurity risks incurred by not using the most recent software can cost you even more than lost customers ever could, according to Norton. Refusing to adopt new technologies might seem like an effective way to pinch pennies, but it will only drain your reserves in the long run.
5. Keeping the Office
There is no business without an office — or so the traditional logic goes. Companies today are thriving remotely, leading many to seriously consider the possibility of getting rid of their offices entirely.
Far too often, leaders trying to save their business money take the office for granted, focusing on electricity usage and cheaper supplies. While it may not work for every company, scrapping the office once and for all can lower overhead costs to near zero without impacting productivity or culture. More businesses than ever are working remotely right now, and staying that way permanently might just be the right choice for some.
Saving money might seem like an easy task on paper, but it has its pitfalls in reality. By focusing on sustainable, long-term improvements for your company, you’re ensuring that your books stay balanced for years to come.