The Covid-19 pandemic has disturbed the whole economy balance globally and is the one big reason for the pull down of the business world. The pandemic has proved to be a threat to the business world. With everything in pause business organizations are facing an economy downfall. There is no demand resulting to no production and no earning. Companies have a lot of responsibilities starting from office expenses to payment of payrolls of the employees and with negative earning it is getting difficult for them to handle the burden. Post pandemic things are going to be more difficult as everything is needed to be started from root with less profit. The one effective solution to this problem is cost reduction. A little cost reduction now will help to survive the crisis and will also save some for future utilization. The cost reduction is a process of reducing cost and expenses of a particular company applying various methods.
Let’s look at the various methods by which we can induce a cost reduction to overcome post pandemic:
- Deferment of bills: due to the huge loss that the companies are suffering due to this pandemic, many banks and lenders are offering bill deferment. This at its best is providing a little relief to the companies against situations like loans, rents, debtors, supplier’s etc. Organization or companies can contact their respective banks to extend the duration of the repayment of their loan but after understanding all the terms and conditions of such deferments. For offices that lease rents can ask their landlords for reducing the rent or an extension, but this is also to be kept in mind that the landlord also runs a business hence whatever will be decided should take care of the interest of both parties. Same with the debtors and supplier.
- Reduce spending: the most important step towards cost reduction is reduction in spending specially on non-essential things. Business should seek ways to spend the least they can. They should terminate spending on non-essential factors like travel, office space, spare time fun etc.
- Save energy: offices saving energy will ultimately find a way to cost reduction. For example: turning off lights and machine when not in use, less consuming of air conditioners and recycling. This is a two-way effective process as it reduces the cost and also helps in saving energy which is also a good thing to adapt.
- Reduction in payroll expenses: many companies are terminating employees due to the large payroll expense they incurred. This is leading the employees to more crisis in such situation. Hence, to save both sides instead of terminating a reduction in payroll of the employees like suspending benefit payments, incentives, travel expenses etc. will be effective for the companies and also the employees will be satisfied without losing their jobs.
- Cheaper option: companies should follow all the cheaper options post pandemic. for example: purchasing raw materials at cheaper cost from suppliers, choose low maintenance service providers, online sales and low cost equipments. Yes, it is true that business should spend money to make money but during such crisis, companies should save money through every possible way.
- Low cost marketing: marketing requires a lot of money that involves advertising and promotion expenses. But post pandemic they should find all the possible way to adapt low cost marketing like Promotion through PR, online promotions and low cost advertising.
The situation might stand out to be a difficult one but elimination of smart way to keep business alive during this Covid-19 pandemic. Cost reduction is always healthy for the business if done in the right way. Apart from all the advantages of cost reductions, the business organization needs to take care of the disadvantages also. In the process of cost eliminating they should be careful to avoid cutting too much as it may harm the business making its market share fall, damaging its quality of service and harm to goodwill. Steps are needed to be taken carefully but to survive post pandemic crisis cost reduction is the very much important so, they can boost up for the success when the pandemic ends.