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Ways your business can manage costs during a recession- Advice from Helcim’s CFO

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Ryleigh Stangness | August 10, 2022

“Advice from Helcim’s CFO on how small businesses can cut costs, build a financial strategy, and come out ahead.”
7 min read

Are you worried about your business in today’s economy? As businesses wrestle with whether to cut costs with weary predictions of harder times approaching, many, like you, may be struggling with the notion of “where.”

In this article, we speak with Helcim’s CFO Marjorie Junio-Read about what you can do to prepare your business for a recession PLUS a few tips on managing general financial health.

First - Get a pulse on your financials

Many businesses struggle to take the time to do a comprehensive inventory of all their spending or lack the resources needed to get a grasp of their financial fundamentals and measure the in's and out's of their business expenses . Marjorie encourages business owners to start simple, with what you do have right now.

"It can be a really simple Excel spreadsheet — if I have any revenue, this is the cash coming in the door, and if not, at least I can tally up my expenses and understand what's going out the door every month,” she explains.

According to Marjorie, making the most of what, and who, you have can make all the difference- especially when hiring is limited and your staff is lean.

"Think about who that person or resource can be. It could be your partner that helps you with your books at night, or even your mom that helps you. Just somebody that can put that hat on and think about, "okay, does the cash in equal the cash out?” And if not, “what do we have to work within?” Marjorie explains the first step is often simply to start by measuring your cash balance divided by your monthly expenses. The result is how many months you would have, if you had no income, before your cash runs out. Although that is the worst case scenario, knowing your cash runway is a huge step, she explains.

From there, Marjorie emphasizes, “keeping a really close eye on your cash balance or trying to find ways to lengthen that out and be more effective with your cash is really critical."

For a more comprehensive guide to managing your books, checkout our article here.

Once you’ve written down some vitals and things are looking stable, you can start looking for small but significant ways to cut some of your costs.

Re-evaluate the small expenses

It can be easier to pin-point huge cost sucks, but that's often not where businesses need help identifying where to make cuts.

"In the age of SaaS, take a look at all of the things that you spend money on in terms of digital tools. Yes, they can help make workflows more efficient, but are there things that you don't absolutely need?” Can you still accomplish what you need with a G-sheet or a Word doc or something that may be more manual? Ultimately these monthly subscriptions for “nice to have” tools can add up.

From a personal perspective, I think about the number of subscriptions that I have at home in terms of Netflix, Crave, Disney Plus. As times become a little bit tighter, you look at them and ask “do I need all of these streaming platforms?” The answer likely is, “well, I could probably live without a few."”

Some other homework items small businesses can look at include:

  • Reviewing your monthly statements to see if you are being overcharged
  • Calling around to ask for a better deal from an alternate provider
  • Asking friends or peers for referral codes
  • Seeing if you can get annual or prorated deals
  • Using your credit card to pay for utilities so you can get rewards or cash-back
  • Seeing where you can switch incoming payments to ACH or EFT to balance the number of transactions you’re paying credit card processing fees for
  • Charge a convenience or surcharge fee to cover processing costs at your business, especially if customers are leaning on credit cards a little more.

"Have a regular review of all of the monthly recurring charges that you have as part of your business and really question if you need all of them or where you can save," suggests Marjorie.

"Maybe some of them are multipurpose or you can adapt one tool to do a couple of things. See if there can be a bit more cost discipline."

Don't cut up your credit cards

While credit cards are associated with higher interest and processing rates, there are some key benefits to using and accepting them in the face of a recession.

As a business owner, your customers are likely pressed for cash so they need the wiggle room to be able to purchase with credit cards.

Feeling the pinch and looking to cut costs on accepting credit cards? Why not implement a surcharge fee? Customers are likely to pay a few bucks more for the flexibility of paying later while getting rewards and cash-back options. This way you don't eat the entire cost of the transaction while your customers get the security, flexibility, and benefits of paying with credit.

Plus, accepting credit cards allows you to process online or over-the-phone transactions.

While it often makes sense to have the option of paying via credit card, there are times where it makes sense to accept lower transaction fee payment methods such as ACH or EFT bank payments as well. Ask your payment provider about which options they offer and see where it works for your business to implement alternate payment options. If you process with an interchange-plus pricing model, you could even be saving just by using recurring billing tools or card vaults to take advantage of lower rates.

Don't jump to layoffs

For Marjorie, it is about being disciplined, intentional and a bit creative when thinking about roles.

"For most tech businesses nowadays, the capital is in human capital - people. I think first we should be thinking, “what is the core of the product or the service that you are trying to deliver and what people are absolutely vital to that?”

There is a delicate balance between not over hiring while also being careful not to overstretch your staff or burn them out. Rather, Marjorie explains, “think about either the people that you have on your team or the people that you are thinking of hiring — are they able to put on a couple of different hats and can they pitch in on a few things as needed?”

Apply for funding, even if it won’t help right now

Don’t wait to look for outside income opportunities until you absolutely need it. That’s a good way to sell yourself short and get yourself into an even bigger mess.

What should you do instead? Marjorie shares one way businesses can utilize government programming to plan ahead. A method, that she says, led to money coming in when she least expected it.

"Now this is a lot of work, but if you have the time you can navigate the system. Government programs have a lot of grants for different kinds of businesses. It can be really, really beneficial." While Marjorie explains it can be extremely difficult to navigate government systems because there are many opportunities with many different eligibility criteria. However, "it can be really helpful because it's often non-dilutive funding which means you’re not giving up ownership in the company to get access to that capital.”

“It can be a grant or a really flexible government loan that you don't have to pay back for a long time. Now it does take effort, but if you're able to get it, it can be huge for your business,” she adds.

As someone who has done their fair share of sifting through government funding opportunities, Marjorie explains the application process can be very long and drawn out.

"If you are imminently running out of cash, this won't be something that can help you because you have to be extremely proactive. Some of our applications took six, eight, twelve months."

However, if you're not desperate for an immediate cash injection, it can be a way of securing future funding.

“It's something that is nice to have that can definitely supplement your business, but you can't rely on it — in terms of timing, it's too uncertain."

Position your business to come out ahead

In difficult economic times, it’s more important than ever for businesses to be proactive in finding ways to cut costs, secure funding, and save money.

Here are five takeaways to help your business weather the storm and come out ahead:

1) Get a handle of your cash balance – track where every penny is going and make adjustments as needed.

2) Assess your expenses – identify areas where you can reduce spending without impacting productivity or quality.

3) Don’t jump to layoffs – downsizing during tough times can actually do more harm than good and may not be necessary.

4) Apply for funding for a rainy day – there are many sources of financial assistance available if you're willing to roll up your sleeves and be proactive.

5) Stay positive – remember that recessions don’t last forever, and things will eventually get better. Preparation and being proactive can help you better prepare for financial hardship while seeking growth opportunities.

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