As the global financial crisis unfolds and we start feeling the impact closer and closer to home, a number of organizations find themselves working out how best to cut costs internally without adversely impacting on their business. There is a lot of uncertainty as to the extent the economy it going to be affected.
There is still a reluctance to use the dirty word ‘recession’, but every bit of bad news coming out of the US brings us closer. No longer are we surprised to hear that the Dow Jones dropped 3% overnight, a scenario that was unheard of for the last couple of decades. Almost daily we are hearing new reports of companies retrenching more staff. Access Economics has recently been quoted as saying “Conditions are worsening very rapidly. This is not just a recession, it will be the sharpest deceleration Australia’s economy has ever seen.”
Given the worsening situation the big questions are, how badly is the commercial property industry going to be impacted and where should companies be cutting costs to minimize the adverse impacts?
“…executives are looking to cut costs and still hit their numbers… real estate is increasingly vulnerable…” Craig Donaldson, Human Resource Magazine 12 January 2009.
We have already seen a decline in commercial real estate sales while the trend amongst the largest Real Estate Agencies is now to reduce staff numbers rather than increase them, something we have not seen for some time.
Executives still want to be able to quickly take advantage of any new opportunities when the economy turns, however need to cut-back now as the economy slows. This is the time when outsourcing becomes a serious consideration.
Is outsourcing the solution you are looking for?
One advantage of outsourcing non-core functions is that it turns fixed costs into variable costs. This allows companies to reduce costs in challenging economic times without affecting the organization’s ability to service their clients and offers them scalability for quick expansion in the future. This might very well be the answer some companies are looking for.
The most commonly outsourced functions include: finance, bookkeeping and debt recovery. Bookkeeping which includes extensive data input lends itself very well to outsourcing and is almost always not part of the core business functions.
Outsourcing service providers invariably offer a higher level of sophistication. They have set efficiency benchmarks and have invested in technology which clients benefit from using, without impacting on the service levels. Cost savings of up to 30% are achievable. In a lot of cases service levels can actually be improved upon as companies focus entirely on their core business.
Is your organization at risk, should you be making changes?
Managing a company in an economic downturn is the real test of being in business. The key is for Management to identify the risks, then implement the strategies necessary prior to the situation becoming critical when your options are limited. Management Consultancy Booz surveyed 830 senior corporate executives from Australia and overseas, and found that more than half the leaders of the companies classed “most vulnerable” had not yet taken defensive steps against the crisis.
In this financial climate Managers need to be proactive and make the changes necessary now which will ensure their company is sheltered from the downturn yet is ready to prosper in the future. Outsourcing non-core functions is one option that would achieve this goal.
Raymond Bechard CA, CMA
Managing Director - TRACC Property Services www.tracc.net.au
TRACC is an outsourcing service provider that has been servicing the commercial property industry across Australia for the past 9 years. TRACC offers a property management system and service solution to some of the largest commercial property agencies, major retail market outlets, fund managers and significant development groups.