One of the hardest-hitting lessons learned by many boards and business owners in 2020 is that the cost of running a business is a lot more than one might realise. Without the ability to earn revenue in a state of hard lockdown, many corporates and MNCs are downsizing, and small businesses are battling to keep their doors open at all. This article aims to enlighten every board member and business owner on how to assess and manage operational costs more effectively.
What are the basic business expenses?
Kielmas (2020) outlines five expenses but here in the face of the COVID-19 pandemic, three are highly relevant: infrastructural costs, wages and salaries, and inventory or raw materials. Let’s talk about the one that most business owners and managers take lightly…
How can you reduce infrastructure costs?
First, you need to understand what these are. Here are some examples:
- Rent or rates and bond payments
- Telecommunications and digital infrastructure
- Cleaning and maintenance (whether outsourced or in-house)
- Applicable insurances
During the state of hard lockdown in many countries in 2020, national governments have made various decisions on the payments related to property rates, utilities and bonds or mortgages, but sitting back and waiting won’t help. If these bills are placing excessive strain on your business right now, rethink your approach. Negotiate for payment holidays or early exit from your lease, and investigate office-space-as-a-service: there’s a good reason why this is becoming more and more popular.
Telecommunications and digital infrastructure
Internet and telephony costs are just two pieces of this puzzle. There’s cybersecurity to consider, and you don’t want to cut back on that. There’s also the digital infrastructure and toolkit that makes your business what it is.
With digital subscriptions rising (Afshar, 2020), it’s worth reflecting on your entire toolkit to identify any overlaps in functionality. If you find any, it means you’re probably paying twice for the same ability. Modular software, like Rapid Global, is becoming popular because of elastic pricing and scalability. You’ll never pay more than you need to, and every single module is able to drive returns for your business in terms of costs, lead times and reporting quality. Click here to browse our product catalogue for more information.
Cleaning, maintenance and security services are considered some examples of business services. If nobody’s in your office space to make it ‘dirty’, you’re bleeding cash through your cleaning costs. At the same time, if yours is an essential services business, you’ve likely ramped up production and service cycles, so these costs have increased. Have you made permanent hires based on what’s likely to be a temporary increase in demand?
One of the easiest ways to successfully embrace both a high state of economic flux, and the resultant volatility in the number and type of contractors required to work on your sites, is to use Rapid Contractor. You don’t need to just take our word, either, you can click here to read more about what this intelligent tool can do.
Fleets are expensive to operate. Between vehicle instalments, fuel and service costs, and spare parts, there are a million and one things that require daily attention. The larger your fleet, the larger your scope of responsibilities.
Consider hiring vehicles instead of purchasing, where possible, so that you can reduce your financial liability and easily terminate a month-to-month lease when necessary, instead of panicking over how to complete paying off instalments for vehicles that are not generating revenue. In the context of an essential service business, times like this also generate heightened demand, so beware of making permanent fleet purchases that may have a limited revenue generation lifespan.
Whether you’re growing, sustaining or downsizing your vehicle fleet, you’ll need to access the service history for each vehicle, logbooks and licensing information. Believe it or not, Rapid Auditor has a built-in service alert feature that also houses whatever documents you find relevant to any asset of yours, including invoices for your vehicle services and repairs. You know what to do: click here to check it out.
Whether you’ve had to ramp up or slow down your business operation, one of the costs that can fluctuate the most is your insurance. Premiums on insurance for business premises, equipment and machinery, office contents, electronic data and vehicles all have factors upon which they are calculated. The factors have undoubtedly shifted, so you may be able to reduce your premiums based on your operational changes during the lockdown.
To help support the thorough, accurate and fair assessment of your insurance risk profiles, you can add your auditors or risk assessors into your business frameworks using Rapid Risk. It’s the quickest and most effective way to show that you’re on top of your game when it comes to managing risk inside your business, regardless of what industry you operate in. Learn more by clicking here.
What are the hidden costs of running a business?
As if the basic and direct business costs weren’t enough to overwhelm you, there’s also the reality of hidden business costs. What are we talking about? Well, for starters, the cost of neglect and shortcuts. Our last article walked you through the vital journey of unpacking whether or not you’re using shortcuts in your business, with the hope of building long term success. Here’s a quick recap of that list of hidden costs, and then some:
- Strike action settlement agreements
- Legal action
- Workmen’s compensation
- Status as uninsurable
- Loss of work, due to production delays
These are just some of the hidden costs that nobody really puts into a business plan, but pop up along the way, and need to be attended to immediately. If you don’t plan effectively and realistically and start using intelligent tools to do so, you’ll find yourself burning out while you’re putting out fires all over your business every day. It’s ridiculously easy to avoid this nightmare, so just do it. Confused about where to start? Click here to share your challenge with us and we’ll help you choose the right tools.
How is Rapid Global software going to help your business?
If you’ve read our software investment guide, you’ll know exactly how important it is that your choice of tools reflect positively for your business in three ways: time, cost and quality. Not sure what we’re talking about? Click here to get the guide that offers more than 20 years of software investment expertise.
Rapid Global can accelerate your lead times
Let’s use reporting as an example of a scenario. Especially in a state of hard lockdown, any sharing of paperwork between colleagues is discouraged from a risk exposure perspective. If you’ve been working with pen and paper or manual spreadsheets, it can take days to generate a monthly report (let alone quarterly, or annual reports). Not to mention, the volatility of this time we’re living through means that by the time the manual spreadsheet reaches you as the decision-maker of the department, things could have already changed for workers on site, and drastically so.
Because the system is remotely accessible, from desktop and mobile, and you can add any number of users you need, to make sure that information is updated on the go, and thus immediately available for making decisions that impact your business. The most relevant modules for this particular use case include Rapid Incident, Rapid Auditor and Rapid Access.
Rapid Global can also reduce your operating costs
It’s easy to assume that a power tool like Rapid Global is expensive, but this is where the pleasant surprise kicks in for CFOs, FDs and Finance teams. The product is priced for your specific needs as a business, so you only pay relevant to your business size and needs, per module. This makes getting started so much easier because the price is not the barrier it usually is when considering other software.
Let’s illustrate this by looking at your operations department in the context of the current effort to emerge out of lockdown while confronting the pandemic. As an employer, any work being done as a part of business operations requires your business to provide personal protective equipment (PPE). If you don’t have a single system, like Rapid Risk, to define what kind of specific PPE is required for each job specification in your business, the risk of ordering the incorrect type and quantity is sky-high.
Because of the risk of exposure, PPE is not easily returned to a supplier in the current circumstances, which means that you’re unable to recover funds outlaid in error. Avoid the trouble completely; check out Rapid Risk by clicking here. We can get you started in no time.
Rapid Global even unlocks superior product and service quality
In the face of the pandemic, Rapid Global paves the way for you to meet even the strictest quality requirements. In just a few clicks, you can upload new checklists in Rapid Auditor, and assign them to your quality assurance staff, for everyday use on the production line. We’ve got a pack of COVID-19 work-ready checklists to share with you, adapted from the South African Departments of Health and Labour’s collaborative guidelines.
Sanitation and packaging procedures can be updated as and when needed, and the best part is that if you also use Rapid Induct, training can be rolled out in days so that every employee and contractor can help your business deliver on the promise of the highest quality outputs even in uncertain times.
Afshar, V. 2020 The impact of covid-19 on the subscription economy. ZDNet. 20 April. Article online. Available at: https://www.zdnet.com/article/the-impact-of-covid-19-on-the-subscription-economy/ [Accessed 13 June 2020].
Kielmas, M. 2020. Top 5 business expenses. Small Business Chronicle. Web page online. Available at: https://smallbusiness.chron.com/top-5-business-expenses-57458.html [Accessed 13 June 2020].