The crisis unleashed since April requires cutting expenses. Two experts explain how to manage the product mix, stocks, providers, RR.HH. and financial flows. Additionally, three B2B firms show how to improve efficiency in means of payment, equipment and technology.
A large majority of companies, after the devaluation unleashed in April, they are suffering the worst situation imaginable. Due to the fall of the domestic market as a result of inflation, who eats wages and pensions, was added a fierce rise in its own costs. But at the same time it becomes impossible for the firms to apply an equivalent increase in their prices., under penalty of seeing his already beaten demand shrink even more. The result, by the way, is a sharp drop in profitability: to the lower volume is added a much lower unit margin.
in numbers: what is usually called inflation is quantified with the Retail Price Index (IPC). In the period September 2017-September 2018, the CPI advanced 40,5%, against a rise in wages 12 and 15 points less. But the mother of the sheep is wholesale prices (IPM), this is, the values that firms face when they pay for inputs or finished products (if they are merchants). A) Yes, in those same 12 months the MPI grew 74%, with the aggravating circumstance that the electricity did the 85% and oil plus gas, a whopping 145,5%. not to speak, what's more, of financial costs, by the official strategy of curbing the dollar by increasing the interest rate to values that exceed the 70% annual.
I don't want to go so crazy, Charly Garcia sang. But what can be done with the costs behind the scenes in a small or medium-sized company?, if they keep hitting us down?
COSTS YES, QUALITY NEVER
Sandra Felsenstein is an industrial engineer from the UBA and founder and director of DINKA, a consulting firm specializing in SMEs. To answer the question, gets almost angry when discussing the option of lowering quality standards as a way to cut costs: “In no way should cost reduction have an impact on the quality of the final product.. Attracting the customer is difficult, but even more so is loyalty. Therefore, it should always be kept in mind to maintain or even improve the quality of the product or service”, Explain.
Clarified this starting point, the expert goes from the general to the particular: “the important thing”, Explain, “is to do a thorough review of expenses, to eliminate those that do not represent an added value for the client and that, Conversely, generate higher costs”. Then Felsenstein adds clues, so as to place the magnifying glass in specific areas. To begin, look at the mix offered. Suggest detect “certain products with slow demand or low turnover, which consequently remain in stock for a long time or are even finally destroyed. A) Yes, minimizing or even canceling these merchandise is a good option, because it should always be remembered that excess stock translates into tied up capital, occupied space, handling costs, risks of breakage, and so on”.
The next chapter to look at to reduce costs, according to the director of DINKA, are the providers. “It is essential to meet with them and renegotiate conditions, something that should be addressed as soon as possible to prevent unpaid bills from accumulating and the debt from increasing. They are not oblivious to the situation and will decide if they want to accompany their clients for the duration of the crisis, or if it will be our time to look for alternatives of provision. However, many times SMEs do not have alternative providers, since they do not spend enough time evaluating options”, warns.
The consultant is now advancing with the organization of work: one of the factors that often keeps costs high, dice, “is a duplication of functions or tasks, which obviously means a waste of time and money. When designing the structure and functioning of a company, regardless of its size, objectives and feasible results must be established, so that the different areas and people work more efficiently and achieve the desired goals. Each member of the team must clearly know the description of tasks related to their position, what their responsibilities are and what is expected of them, to optimize in this way the work of each area and avoid waste”.
However, by streamlining task, the specialist raises an alert about the role of the owner of the SME: “Special attention must be paid to the fact that in desperation and in an effort to reduce expenses, the employer does not end up performing operational tasks, away from what is really crucial to righting the ship again: work on strategy”. and add: “In any case, during times of crisis, managers should not only put their energy into cutting costs, but also in keeping your team motivated to continue betting on the project. The team must be perfectly aware of the situation and feel that it is part of the process of overcoming the crisis”.
MARKETING, INVESTMENT, RR.HH.
Another strong warning from the engineer goes through the impulse to reduce the staff as a response to the crisis and the need to lower costs. “Before dispensing with some collaborators, it is necessary to consider other alternatives that allow this complicated period to pass.. Why lay off staff?, beyond how stressful and unpleasant it is, can also affect the productive capacity, generating an inconvenience greater than the savings achieved. By case, as explained before, if the entrepreneur ends up performing operational tasks that were previously done by someone else, because the opportunity cost must be considered: entrepreneur's time, applied to those actions, it is much more expensive and generates higher hidden costs”.
Having said that, Felsenstein suggests some measures to reduce personnel costs: “For example, some kind of reduction in working hours or shorter work weeks. Also cut extra bonuses, postpone salary increases, Advance vacations and other options that the employees themselves can provide, to collaborate in maintaining the activities of the firm and conserving sources of work”.
Two other lines points out the expert, to streamline activities. first in marketing. It advises not to lower its intensity, just change channels: “We must take advantage of the great possibility that digital tools offer us today (social media, mailings and others), replacing the old brochures or the very expensive advertisements on TV or public roads. A good communication plan will draw the attention of your own customers and other users of similar products. The important thing is not to abandon communication and positioning efforts, but strengthen them, albeit effectively and at low cost”. Its next axis is innovation, “which is usually thought of as a great investment and only suitable for large companies. But it also involves finding alternative solutions., which often generates significant savings”, Explain.
Finally Felsenstein faces a question seemingly out of place and time: Is it possible to think about investing while seeking to reduce costs?? “You have to differentiate both”, clarifies. “Costs are expenses in each exercise, while an investment is an improvement that will pay off. For example, invest in more efficient machines. Anyway, it is important to invest without generating financial inconveniences”. A) Yes, credits can be applied, “but always research thoroughly, to consider the requirements, associated expenses that may exist, compare interest rates, but above all, if what is offered meets your needs and your ability to pay. little time ago, a customer in the organic food industry, for whom we were working on a project that contemplated precisely the reduction of costs, decided to invest in the purchase of a packaging machine with features far superior to the one they had at that time”. the ending was happy, Explain, why “Shortly after its start-up, the returns of merchandise due to failures decreased significantly. Clearly, the investment in this case significantly improved the monthly costs”.
DAMN RATES
The financial cost, everybody knows, has skyrocketed in recent months. But there are some other options when funding the company, according to Carlos Diaz Delfino, partner with Daniel Romano and Laura Fiocca in the consulting firm that bears their last names, and specialized in mergers and acquisitions as well as strategic advice, planning and control for medium-sized companies. First, Díaz Delfino approaches a tool for self-diagnosis: “If a company has such a level of indebtedness that interest services are equivalent to the majority of operating profits, the financial risk is very high. Because in the face of any unforeseen (reduction in the volume of activity, decline in gross margins, and more), the company could not meet the payment of debt services. in that circumstance, it is preferable to offer discounts or bonuses to receive payments from customers in a shorter term, although this tool must be used with great care. At the same time, must minimize sales to customers with very long payment terms, o Prioritize purchases from suppliers that offer better payment terms”, warns.
As alternatives to finance, Díaz Delfino suggests resorting to the capital market, “with the issuance of instruments as a ON (negotiable obligation) SME or, inclusive, analyze the opening of capital to the market. Access is not as easy in times of financial turbulence as the current one and, what's more, Not all SMEs are administratively prepared for these processes, because the company will begin to be subject to important requirements for the presentation of accounting and financial information”.
Another option, dice, it would be adding a partner “contribute capital to the company, issuing in return new shares or quotas”. And additionally, you can resort to loans guaranteed by a Reciprocal Guarantee Company (SGR), thus accessing more convenient interest rates. in addition, at times when market rates are higher than tax debt financing rates (AFIP and others), some firms decide to enter tax holidays or payment plans.
