Cost Cutting or Software and Process Improvement?

With the state of the markets lately, many small businesses may be concerned and their ability to withstand the changes.

A recent survey by Harris Interactive has found that 63% of small business owners are extremely concerned about the future of the economy. Their second biggest concern is cash flow.

In these circumstances, many businesses go out and start cutting costs. In many cases, these cuts are across the board, cutting all costs equally, and stopping all investments.

During a slowdown, business owners have to take a close look at their costs, but they need to look at cutting costs from a return on investment perspective. In my experience, many businesses don't look at many of their ongoing expenses. They pay far more for non-essential services than they need to. They also don't gain as much as they should when they do invest in new technology.

When business slows, there is the opportunity to take time to re-evaluate what is happenning in your business. Are you getting the best deals on non-critical services? A colleague of mine reviews the non-primary services for clients and only charges when he finds savings. His skill and knowledge, as well as experience with dealing with suppliers allows him to get better deals for clients, often without changing suppliers. Every cent of the savings goes straight to the bottom line.

Another area of savings opportunity is with technology. Most businesses buy software and implement only small parts of the features. This is understandable as the complexity and variety of features available in most software are far too much for a business to reasonably grasp in a short period of time. However, most businesses never get beyond the initial implementation. Once the first stage is completed, they stop because they get too busy. The software supplier leaves, because their software is installed and they have their money.

There is a lot of function left on the table, and much of this function may add value to the bottom line, without further investments in technology. The key here is too look at your business problems, see how your processes could be improved and implement some of the new function.

There are a number of benefits to this:

1. You reduce costs during a period of slow growth.
2. You get the resources to make the improvements because of the slowdown.
3. You reduce your costs for the long term, putting you in a better position, when the economy recovers.
4. Your improved processes deliver improved customer service at a lower cost, allowing you to grow your business when others are cutting back.

Many of the projects that I have undertaken have been to deliver improved customer service. In every case, we reduced costs while delivering improved customer service. I believe that this will always be true. Poor customer service costs money. It loses sales. The source of the problem lies in your business process. If your process is bad, it takes extra effort to deliver good service.