Reducing Operating Costs: The Key to Growth in a Slowing Economy

Managers are facing an economic slowdown as we move through 2022, and there are a number of strategies businesses can use to maintain profitability. A slowing economy is also an opportunity to assess your entire operation, and to make improvements that may provide benefits for years down the road. Many businesses are reducing operating costs to improve outcomes.

Some operational tasks, including accounts payable (AP), require a large time investment, and technology can help you complete more work in less time. Stampli’s end-to-end AP Automation platform gives you full control and visibility over all your corporate spending from cards to invoices and payments — all in one place. 

There are a number of challenges that managers are facing in 2022.

Reviewing Economic Challenges

Successful businesses are implementing plans to address these issues, so firms can maintain profitability.

The impact of rising inflation 

Inflation has increased the cost of both materials and labor, and businesses must consider price increases to maintain profit margins. Higher inflation also means that consumers have less disposable income, and spending may decline. When the Federal Reserve increases interest rates to combat inflation, borrowing costs increase for businesses.

Managing supply chain disruptions

The pandemic and other factors have made it more difficult for companies to get the raw materials and services needed for production. Suppliers are struggling to meet customer demand, and businesses are dealing with production bottlenecks. 

Finding and retaining talented workers

PwC’s report on CFO concerns for 2022 discusses higher costs to hire and retain talented workers. Employee turnover is expensive, and company productivity may suffer. When a staff member leaves, that individual’s work must still be performed, and some tasks may not be completed. 

In addition, managers have to invest time to find, interview, and evaluate qualified candidates, which takes time away from running the business.

Perhaps most importantly, management needs to demonstrate that they have a plan to get through a downturn, so that the staff sees a positive direction moving forward. As you start to form a plan, focus on the key processes that your company must complete to operate the business.

Evaluating Tasks That Must Be Completed

Every business has a current system to make a product or service, deliver the item to customers, and to collect payment. Other functional areas include payroll, human resources, and regulatory due diligence. Here are some other important tasks:

• Manufacturers: Purchase material and incur labor costs to produce a quality product

• Retailers: Purchase and store inventory to meet the needs of customers

• Assets: Businesses need to repair, maintain, and to eventually replace assets over time

If your business can operate more efficiently, you can reduce the cost per unit sold (or cost per service delivered). When you lower the cost to operate, you’re in a better position to grow sales. Review each area of the business, and look for opportunities to work more productively.

Assessing Operating Costs

Every business task requires a certain amount of costs, and each process a firm performs should be evaluated. These factors impact the cost of a particular task:

• Complexity: A task that requires more steps takes longer, and the risk of error is higher. Payroll is a complex process, because each individual’s tax withholding on income may be different.

• Training: Well-managed businesses document each routine task in a procedures manual, and train employees using the manual. Using a manual clarifies how each task is performed, and makes training easier.

• Level of automation: Manual tasks require more time and generate more errors than automated processes. If a firm is manually calculating tax withholdings on payroll, the process is time consuming and may result in numerous errors.

Many firms are embracing automation as a tool to work more productively, and to reduce errors. When you lower costs, you can operate with less cash, and the company is under less pressure to collect accounts receivable balances for cash flow purposes. 

Accounts payable is an area that may require a number of manual processes, and you can reduce or eliminate manual work using automation.

Considering Manual AP Processes

The AP staff may process hundreds or thousands of transactions a month, and processing AP impacts invoice coders, approvers, and company vendors. Here are some common tasks that may not be fully automated:

• Receiving invoices: Invoices are received in hardcopy through the mail, or attached to emails that are sent to multiple recipients.

• Invoice processing: Paper invoices are sent to approvers, along with hardcopies of purchase orders (if applicable) and shipping receipts. After the invoice is approved, the paperwork is sent to accounting, so that the payment can be processed.

• Follow up on exceptions: If there’s a question about invoice approval, the AP staff calls or emails company staff to get clarification. Additional documents may be submitted.

This manual system leads to slower approvals, lost documents, and poor communication between stakeholders. The organization does not have a central place where the invoice and all other supporting documents are available for review. As a result, the AP team can’t monitor the total number of invoices outstanding, the total dollar amount, or the due dates. Without this information, cash management becomes difficult.

Businesses can reduce AP costs, decrease hours worked, and eliminate errors using Stampli.

Improving the AP Process with Stampli

Take control over invoice and bill processing with smart, intuitive, and actionable AP Automation. 

Stampli is a complete AP Automation software that brings together accounts payable communications, documentation, corporate credit cards, and ACH or check payments all in one place, allowing AP to have full control and visibility over corporate spending. 

By centering communications on top of the invoice itself, AP departments collaborate and communicate better with approvers, vendors, and any stakeholder involved with purchases, allowing approvals to happen 5x faster.

Stampli is also a month-to-month expense that does not require a large cash investment up front. You can vastly improve AP processing without a big upfront cost, or a long implementation period. Businesses can improve vendor relationships, and gain full visibility into accounts payable data with Stampli Insights.

Don’t just manage spend- control it. Lower your operating costs using Stampli.