During the pandemic, you will need to take a look at both variable and fixed costs within your business to see where reductions can be made to free up cash. Before you begin a detailed review, make sure you have all of the data you need from all areas of your organization so you can look carefully at each line item. It is also important to establish meaningful metrics, so you can keep tracking them and take action before your next review.
Consider these practices and strategies:
- Think about costs during different scenarios: 1. Closed, 2. Pre-opening, 3. Ramp-up, 4. Low period
- Determine which costs will stay the same and which will increase due to new health regulations (i.e., additional cleaning, training).
- Brainstorm with employees to find potential savings. Create a reward system as an incentive.
- Reduce inventory to align with forecasts, and eliminate waste.
- Compare the profitability of different products and/or locations to make cost reductions.
- Implement reduced hours for employees and redistribute work.
- Review complimentary and non-essential items (e.g., flowers, magazine subscriptions) and reassess for value.
- Consider selling and then leasing assets back to raise cash.
- Work with an accountant of financial advisor to create an efficient and effective tax management plan.