How to Reduce Operating Costs in Recession

Reduce Operating Costs in Recession

 

Although cost-rationalization and bringing efficiencies into spending is a constant endeavor for businesses, during times of expansions many overheads tend to get ignored. A recession is the time for a stock-taking of your operational costs, and it is almost always possible to ring-in more cost efficiencies in an organization on the operations side.

Purchasing procedures, for example, can be examined for possible areas for reducing costs. Authorization processes can be checked to ensure adherence to authorization limits. Adequate controls on spending limits can be enforced and the number of people authorized to make purchases can be limited to make accountability easier.

 

Analyzing how your existing base of suppliers is structured can also give you clues to reducing purchase costs. Consolidating purchases can grant additional buying and bargaining power. Consolidation of suppliers will also produce a reduction of administrative expenses due to processing fewer purchase orders, invoices and payments.

 

Also, try negotiating with current suppliers for better pricing and consider proposals from alternative suppliers to lower costs in all operating expenses areas including the smaller expenses.

 

Assigning a team of employees to analyze an expense category can identify areas of expense reduction. Employees can often identify items with less expensive alternatives that will meet the needs of the organization. Sometimes, items are identified that can be eliminated entirely without affecting the organization.

 

Rewards for participation in the effort to reduce expenses can include financial and other incentives but recognition of their achievement should also be motivational.