Business owners must be strategic when it comes to altering their staffing structure in response to market uncertainty, with experts warning a balanced approach to scaling back jobs is better for business in the long-term. Here’s the strategies you need to know.
According to RSM Bird Cameron national head of business solutions Andrew Graham, employers need to remember that scaling back on jobs in the first instance can do more harm than good for business in the long term – making a balanced approach necessary.
“Businesses need to find a way to operate efficiently and effectively and part of this is assessing the staffing structure to ensure the best results are achieved. It is about making sure the right people are in the right job at the right time to drive productivity improvement,” Graham said.
So, before cutting jobs, employers need to look at the following strategies for improving efficiency and strengthening and growing their business.
1. Improve efficiency
It’s not only staff expenses and overheads that add to a business’s cost structure. The configuration of activities and how things are done in a business along with the processes used can add additional layers of inefficiency (waste) and cost to the business. This waste needs to be identified and removed from the business as a first step before actively looking to reduce head count.
2. Improve management of credit facilities
Business owners should consider their current level of financing and the possible need for further debt financing in the future. Securing new debt facilities or re-financing existing loans has become increasingly difficult. Get to know your bank and give them plenty of notice if you’re in need of increased debt funding.
3. Increase management of cashflow
Management of cashflow is of the utmost importance and a key indicator of business health. While profitability is important, it is cash that determines a business’s survival. Also, look at management of inventory levels as you will be surprised how much cash can get tied up in stock.
4. Review customer and supplier relationships
In economic uncertainty or recovery, customers are likely to pay their bills more slowly and the liquidity of a business can be negatively affected very rapidly. Businesses who rely on only a small number of customers may find themselves at risk if one of their key customers falls into financial trouble. Make a list of your top five clients – these are the ones that are your biggest exposure and make sure you are happy with providing them credit.
5. Check that your new customers are financially healthy
Business owners should be screening new customers very carefully and being selective of those customers who are offered credit terms. Any terms of trade should be formalised with customers. Actively follow up all debtors, formally negotiate your credit terms, ensure invoices are sent out to customers quickly and consider offering discounts to customers who pay promptly.
6. Bargain with suppliers
Negotiate your credit terms and consider taking advantage of any discounts on offer. Most suppliers will be eager to be paid promptly and ‘cashed up’ businesses have the opportunity to take advantage of this by receiving discounts for prompt payment of invoices.
7. Improve profit
There are always ways to improve the financial state of your business. For instance, increase the number of customers buying from you, increase the number of times customers buy from you, increase the amount customers spend with you and improve the gross margin on each sale.
8. Lead your team and manage stress
A lot of workplace stress is subjective and can be a result of how the person perceives what is happening. Stress can be caused by lack of communication, poor air quality, poor lighting, high noise levels and poorly designed and uncomfortable office furniture. If the workplace is depressing your employees, change it. This is likely to increase productivity and reduce absenteeism.
