During the current economic crisis, I keep observing that so much business attention is placed on deferring supplier payments, trying to stretch 30 days to 60 days. Whilst managing cashflow is obviously crucial, deferring payments is only temporary relief. Effectively, just “kicking the can down the road”. Creating supplier friction for minimal benefit.
To successfully navigate the pandemic downturn, it is more important to be focused on a SUSTAINABLE REDUCTION in operating costs. So that once lockdown restrictions are over, your business can survive and remain profitable throughout the looming recession. A sustainable cost-out program needs to be comprehensive, and cover all areas. Too often, the burden falls squarely on staff, via restructuring, pay-cuts, and layoffs.
There are so many opportunities to save that do not impact staff.
Some expenses can be reduced or eliminated altogether (e.g. software subscriptions which are no longer in use). There is the multitude of admin expenses which almost never get reviewed (print management, staff amenities, stationary etc). For more strategic suppliers, there are often collaboration opportunities to work together and share the benefits. (E.g. freight and 3PL partners)
Australia’s fist recession in 28 years is going to be a challenge for many businesses. It will be the leanest businesses which are best placed to survive and thrive.