How To Keep Expenses Low Without Layoffs

Are you experiencing hard times in your company? Or maybe you've spent more than your budget allows. While laying off staff might look like a quick and easy option to reduce your expenses, it's not a healthy choice.

Before you think of calling in some employees to deliver the bad news, here are some things you can do to keep expenses low without resorting to layoffs.

Audit your expenses

When your company faces financial problems, the first thing you should do is conduct a full expense audit. This will help you identify areas of wasteful spending so that you can trim them accordingly. You may discover that you've been spending too much on advertising or that you can reduce your shipping and logistics expenditure.

Cut back on nonessential items

From your expense audit, you can find nonessential expenses to cut. These can include recurring subscriptions, traveling allowances and anything that doesn't affect your business directly. You can opt for virtual conferencing services instead of traveling for meetings, or you may choose to downgrade the subscription of some work applications.

Executive salary cuts

As the company head, you should look at your own salary. You can choose to reduce your salary by a certain percentage and then reassess as needed. Taking a pay cut of your own will show employees that you value them enough to keep them while taking a cut yourself.

Additional salary cuts from top to bottom

When cutting your own salary is not enough, you can go for slight salary cuts starting from top employees down to the bottom. You can start with a small percentage, so it doesn't significantly affect personal finances, but it will still be enough to give your business a financial break.

Pause raises and bonuses

Another way you can keep expenses low without layoffs is by pausing salary raises and freezing bonuses. Your workers won't be happy, but it's a better option than laying them off, and some of them will see it that way. There is no point in adding additional cost to your finances when you're facing turbulent and unpredictable financial conditions.

Implement a hiring freeze

You might get tempted to deploy mass layoffs in favor of hiring new workers at lower salaries. While this might look like a good option, it's not, and it costs less to retain valuable employees than to replace them.

Encourage employees to work from home

Thanks to tech advancement, we now have sophisticated tools that allow people to work from home effectively. You can cut costs by allowing your employees to work from home. You may gain savings on water, electricity and other utilities, even office supplies.

Reduce production

If you're experiencing low demand for your products, there's no point in producing more. So instead of dropping employees, you can reduce the number of items or products you produce. You might also want to look into retiring products that cost too much to produce.

The reduction of products may also help with the storing and shipping of items. Cutting production will trickle down the supply chain and save money in the long run. As you begin to make more money, you can once again reassess your production schedule.

Ask your team for suggestions

Gone are the days where you made important decisions on your own. If you built your company on teamwork and transparency, then the best action to take is to let your team into the company's current situation. Ask them if they have suggestions on how you can reduce expenses without eliminating employees.

Initiate mandatory employee furloughs

Furloughs are a better alternative to layoffs. A furlough is when employees take partially paid or unpaid time off for a couple of weeks or indefinitely. For instance, you can close your business for a week or two, ask employees to take some days off without pay, or reduce their working time to three weeks a month. When work picks up again, you can bring employees back without going through normal hiring practices.

Final thoughts

Financial troubles are challenging to manage within a company. Reviewing expenses and looking for ways to reduce expenditures can save employees their jobs. Seek advice from fellow entrepreneurs and be open to suggestions on how to avoid layoffs. Your employees will thank you.