Federal and state government packages are helping SMEs afloat in the wake of COVID-19 impacts. However, it’s important to remember that government assistance is not intended to be a long-term proposition and SMEs need to chart their own course through the post-pandemic world.
While government funding is valuable and, potentially, essential for these businesses in the short term, their ongoing survival will depend on their ability to manage cashflow without government support.
One of the most immediate ways to boost cashflow is to streamline processes and slash costs. Automating key tasks such as invoicing can save SMBs an average of $34,000 annually and free up valuable staff members to focus on growth-generating activities instead of operational processes. This can have the additional benefit of helping to reduce bookkeeping and accounting costs for the business.
Another key area where businesses can generate significant savings is in reviewing their expenditure. Gaining visibility into how much the business is spending, on what, and with which suppliers, is just the start. Businesses can then analyse that information to determine whether they might be able to find cheaper or better-quality suppliers, cut some costs altogether or negotiate better terms with existing suppliers.
No business can afford to throw money away, especially in the current environment. However, by relying on government funding without closely examining the business’s expenditure and processes, that’s virtually what business owners are doing. SMBs have a unique opportunity right now to use the government support packages to redefine their business operations and invest in productivity-boosting solutions that automate tasks, improve visibility into spending and ultimately help the business operate more cost-effectively, which helps build greater organisational resilience.
There are five costs that most SMEs can eliminate or reduce right now:
1. Vendor costs
Working with the same vendor for a long time can lead to a “loyalty tax”. By reviewing vendor relationships and potentially choosing new suppliers, businesses can attract discounts and bargains. It may also be worth working with existing suppliers to negotiate more favourable terms or costs.
2. Late payment fees
Paying invoices on time or early can lead to discounts but many SMEs don’t have the visibility they need to keep track of invoice deadlines. A better understanding of expenditure, including timing, can help businesses avoid late payment fees.
3. Reduce unnecessary costs
Some businesses are paying rent on premises they don’t really need. The pandemic showed that most people can work from home. SMEs should therefore consider moving to a remote workforce or use co-working spaces to reduce real estate costs.
4. Streamline business travel
Some business-related travel remains necessary and is likely to increase as more restrictions ease. However, it is possible to reduce travel costs by setting up strong supplier relationships and using a travel and expense management solution to track all related spend, including employee travel expense claims.
5. Manage employee spend
Running a business means authorising employees to spend money on business expenses. If not managed carefully, this expenditure can quickly get out of hand. It’s therefore essential to keep a close eye on what employees are spending money on and to ensure they’re complying with your spending policies. It may also be worth revisiting those policies to tighten spending, at least in the short term.
Using a cost-effective, cloud-based expense management platform can help SMEs better manage cashflow, reduce operating costs and identify where there may be more opportunities to save money in the business. All of this is crucial in an environment where government assistance is unlikely to last much longer and businesses will soon be forced to survive on their own.
Fabian Calle, Managing Director – SMB, SAP Concur ANZ