Over recent months, fears of an upcoming recession have continued to grow. The current landscape is challenging from an economic perspective. Inflation is pushing up prices for various goods and materials, leading to higher costs for businesses in nearly every sector. Plus, wage expectations among professionals are trending upward, and many companies are seeing their payroll increase dramatically to remain competitive.
This creates a daunting financial picture for organizations. As a result, saving for a possible recession now could be essential. If you aren’t sure how to prepare for a potentially challenging situation, here are some steps companies can take today.
Steps Your Organization Can Take to Prepare for a Recession
Start with an Audit
Before you begin making cuts, it’s critical to understand where your money is currently going. Examine spending throughout the organization and in every cost center, determining if there are logical areas where scaling back is possible and impacts productivity the least.
In many cases, beginning with recurring expenses is wise, particularly those that are unavoidable. Utilities and communication services are smart places to start, though it’s critical to branch out if cost reductions in those areas alone aren’t sufficient to provide ample savings.
For example, taking a close look at your supply chain is essential. The cost of materials, supplies, shipping, distribution and similar operational needs is often substantial. It’s wise to reach out and see if better deals are available. Find out if existing providers can reduce rates with or without changes to normal activities. Also, contact competitors for price comparisons, as making a switch could result in savings, suggesting the new vendor could perform similarly.
Rethink Your Physical Space
Building leases are often costly, so finding ways to reduce location-related expenses can make a difference. If you’re near the end of a lease, consider whether a smaller footprint could meet your needs. For example, would you need less room if your office employees worked at home instead of onsite? Can you manage your operation if your warehouse space is reduced?
Alternatively, you could explore subleasing options if you have extra room and can’t shift to a new location. Whether that’s possible may depend on your existing rental agreement, but it’s worth exploring.
Communicate with Workers Early
Communicating with your workforce before a recession lets you set the stage for potential changes. Being honest with your employees about what a recession could mean – particularly if it may impact wages, benefits, or job stability – allows you to get ahead of the curve. Plus, if your company is considered an employer of choice, your workforce may volunteer to make certain sacrifices to preserve jobs, allowing you to work with them when making difficult decisions.
This also serves as a chance to get their input about potential cost savings measures. Your ground-level workers may know areas where efficiency improvements would be beneficial. Essentially, you can tap their job expertise for ideas, and the results may surprise you.
Invest Strategically to Improve Efficiency
While you may think investing in anything isn’t wise if a recession is possible, that isn't the case. Strategic investments that improve efficiency are smart additions if they result in the right degree of savings.
Look for automation and digitalization opportunities. Additionally, find ways to streamline your ongoing workforce needs.
With a vendor management system (VMS), you can ensure that overseeing a contingent workforce is as easy as possible. Plus, it can help you tap into alternative hiring solutions that give your company more agility.
Looking to Mitigate of Financial Impact of a Potential Recession?
Choosing the right VMS can make a difference if you want to prepare for a recession. At SimpleVMS, we offer efficient, cost-effective VMS solutions designed with your needs in mind with lots of no-cost add-ons. Schedule a no-obligation demo with SimpleVMS today!