If you are the owner of business that is facing cash flow difficulties, being able to reduce overheads is a significant step in the right direction and can be all that is needed to resolve the issues.
All company directors should review management accounts periodically looking to reduce overheads as a matter of routine. This becomes even more important when cash flow is an issue. Some areas where you can reduce overheads include:
When a business is experiencing difficulties advertising and development budgets are usually the first areas to face reduction. However it must be remembered that advertising can be a key sales tool so a balanced approached is required.
There are several ways to reduce staff overheads. These include a reduction in overtime, although the choice can be more severe and redundancies may be unavoidable. Again there needs to be a balanced approach as there are initial cost implications and care should be taken.
The purchase of equipment might be limited to essentials required for the business to function and for staff to undertake their jobs until the financial situation improves.
If staff have been made redundant freeing up available work space, consider sub-letting the space? This can help reduce rental overheads considerably and/or generate income if you own the property.
It may be possible to renegotiate more favourable credit terms with long-term suppliers to either reduce costs or increase available credit.