3 cost reduction strategies to help your business remain profitable in 2025

In challenging times, effective optimisation of processes and practices will enable businesses to survive and thrive, writes Brendan Maree.

Are you expecting the upcoming year to be a bumper one for your organisation?

If you answered in the affirmative, you’re in something of a minority. For many local businesses, the next 12 months are likely to be characterised by the same lacklustre demand they’ve endured over the last 12.

Our enfeebled economy grew by just 0.8 per cent through 2024, the lowest rate since the COVID-19-affected December quarter of 2020, according to the Australian Bureau of Statistics. The main drivers of that anaemic growth were government spending and public capital investment, not the healthy private sector activity that’s the sine qua non of a healthy market.

At this stage, 2025 is expected to bring more of the same, with a decent-sized dollop of political uncertainty, courtesy of the upcoming federal election, thrown into the mix.

With consumers continuing to remain on the sidelines, we can expect gross domestic product (GDP) growth of 2.2 per cent in 2025 and 2.3 per cent in 2026, according to NAB’s The Forward View – Australia: September 2024.

Doing more with less

Against this gloomy backdrop, doing more with less has become a necessity for businesses of all stripes and sizes.

One in four SMEs already optimise their existing assets and capabilities to achieve growth without new overheads or outlay, according to NAB business banking metro and specialised industries executive Julie Rynski.

“The fact is, businesses are gritting their teeth and getting through these more challenging times as best they can, using whatever tactics, assets, and can-do attitude they have available,” Rynski writes in the bank’s Business Pulse December bulletin.

Like to take a leaf out of their playbook? Here are some ways you can do so.

Keeping a lid on contingent worker costs

Since the onset of the COVID-19 pandemic, our collective perception of the workplace and how it should be organised has changed significantly. Hybrid working is now here to stay. So, there is a greater reliance on contingent workers to complete semi-skilled tasks and, increasingly, to take on higher-level responsibilities and assignments.

This flexible modus operandi can be a great way to contain costs, provided those costs are tightly managed. If not, it’s an easy way to overspend.

The devil is in the details, and that’s why it pays to use data analytics to help you get an accurate handle on exactly what resources are needed and to track the productivity and outcomes of the individuals in your remote and contingent teams.

Plugging payroll leakage

While your workforce is undoubtedly one of your biggest assets, it’s also likely to represent one of your greatest costs. That’s why it’s helpful to crack down on payroll “leakage” in the form of incorrect time tracking, unaccounted absenteeism, and excessive and unapproved overtime.

This potentially unnecessary spending can account for up to 2.5 per cent of total payroll expenses, according to recent research from Deloitte. Use employee analytics to pinpoint when and where it’s happening and you’ll be able to start working out ways to rein it in.

Leveraging workflow automation

Repetitive manual work used to be part and parcel of running a back office, but in today’s times, it no longer needs to be. Adopting AI-powered workflow automation allows businesses to eliminate many of these high-volume, low-value tasks and reduce the incidence of errors in the bargain. Make the switch, and you’ll free your team up to focus on higher-value tasks, including the delivery of standout customer experience that drives sales and loyalty, even in the toughest of times.

Tools to make the task easy

Collecting and analysing the data you need to optimise multiple aspects of your operations used to be a time-consuming and tedious process. Fortunately, that’s no longer the case.

Invest in an operations enablement and workforce platform and you’ll have the ability to carry out in-depth data analysis and monitor a range of employee-related metrics in real time. Knowledge is power, and once you’ve extracted these insights, you can action them to improve efficiency and employee engagement, right across the enterprise.

If making the most of what you have is your mantra for 2025, it’s foundation technology that will help your organisation walk the walk – and reap the rewards that follow.

Brendan Maree is the vice president and country manager for Australia and New Zealand at ProHance.