OK, so we’re in a recession, and a really bad one at that. Ask the experts how long it will last and you’ll hear everything from 5 or 6 more months to 5 or 6 more years. One thing is certain, though—everyone agrees that it won’t last forever.
So what do you do with this not-so-helpful bit of information? Here are some ideas for ways to avoid some of the common mistakes of past downturns—and get a head start on your competition at the same time.
It Starts With Cost Control
Financial strategies for any company in these uncertain times should consider the company’s fundamental strength in designing a cost control program. Across-the-board cost reductions, so common during times like this, are fairly easy to initiate, but can be damaging to a company’s foundation over the long term. Instead, consider these guidelines for creating a more effective cost reduction program:
• Focus your staffing reductions on marginal performers throughout your workforce. This is an excellent opportunity to relieve your payroll of under-performers with minimal risk of backlash or legal exposure. If you have delayed having a confrontation with these employees or their managers, do it now. (Your potential legal exposure, of course, is based on your individual situation, and you should always consult a labor attorney in questionable cases.)
• Cut costs in areas that will not impede your recovery or affect critical current programs. You can cut these costs sharply or eliminate them entirely. Examples include planned enhancements to employee benefit programs (even if announced), replacement of inefficient equipment that still keeps up with demand, and refinancing of corporate borrowings at lower current interest rates.
If you have questions about cost cutting, reach Gene at gene.siciliano@cfoforrent.com or 310-645-1091.
Next: More cost-cutting guidelines
Gene Siciliano, CMC, CPA, is an author, speaker and financial consultant who works with CEOs and managers to achieve greater financial success in a dramatically changing economy. As “Your CFO For Rent” and president of Western Management Associates, he has spent more than 20 years helping clients build financial strength and shareholder value through applied knowledge and process improvement. His book “Finance for Non-Financial Managers” (McGraw-Hill, 2003) is available in bookstores and online. Learn more and access Gene’s free article archive at www.GeneSiciliano.com.
