Firms should adopt simple but effective strategies to survive during economic woes
Small and medium-sized enterprises (SMEs) need to be particularly careful to ensure that they balance the books as there are no immediate signs of a quick economic recovery. Companies also need to brace themselves for a possible second wave of the financial tsunami.To avert the likelihood of companies going under, there are good management practices that they can consider in order to maintain healthy balance sheets. According to Mark Gilbraith, a partner at PricewaterhouseCoopers, there are strategies that can be implemented to help prevent SMEs from running into debt.
He said reviewing general expenditure, such as business travel and entertainment expenses, would be a good start. From a budgetary perspective, it was essential to find ways to reduce spending levels or remove them wherever possible.
'Companies allowing non-capped entertainment expenses should consider changing the system immediately and draw a budget limit,' Mr Galbraith said. 'And business travel frequency should be reviewed case by case and [the firm should] cut down the length of stay for individuals whenever possible.'
Companies that offer enviable employee benefits, such as sponsoring gym memberships, children's education and holiday allowances, should consider suspending these perks. 'It may seem trivial but it can add up to an enormous [cost] if [they are] not careful,' he said.
As staff retrenchments would probably continue through the first half of the year, Mr Gilbraith said companies offering overtime pay should keep this to a minimum if it was not practical to cut it out entirely.
Employees would not be surprised with measures to drive costs down in difficult times. 'Working overtime without proper compensation is not a nice thing to do but it has to be done in the interim,' he said. 'But I am sure employees would fully understand that and go along with what is considered best for the company.'
While unsure about how long the economic crisis would last, Mr Gilbraith warned against companies reducing permanent headcount as an easy way out lest the economy started to pick up. 'Companies should review internal manpower resources and devise an effective deployment strategy accordingly,' he said. 'They can offer employees the choice of unpaid leave for a period from one up to six months and review the financial situation of the company at a later date. Alternatively, reducing the number of staff working days or hours also helps save costs.'
Cutting down on the use of contractors when business is slow and having employees cover for colleagues while they are on unpaid leave are also viable solutions.
'Multitasking of individuals within the manpower deployment strategy is not unusual during a financial crisis and it happens with many companies,' Mr Gilbraith said.
