1 Have a plan

Cuts should be made strategically: demanding that all budgets are reduced by, say, 10 per cent can make matters worse by damaging business-critical areas while failing to make deep enough cuts in others.

Such an approach can also increase costs in other areas, while any savings are less likely to be sustainable than targeted cuts, according to the authors of Intelligent Cost-cutting, a report by sourceforconsulting.com, an information service.

2 Don't wait

“Once you've worked out what you are going to cut, it's better to act promptly and aggressively than to kill by a thousand cuts,” Brendan Cahill, the chief executive of Trinity Horne, a consultancy, wrote in Intelligent Cost-cutting.

“You have to be able to deliver tangible savings within three to six months. Longer than that and people start to lose faith in your ability to deliver.”

Even companies that do not believe they are in trouble should be making cuts, Harry Gaskell, head of business advisory at Ernst & Young, said. “Even if [costs] are not a problem now, they may be later. Starting early means the business isn't under as much pressure.”

3 Free up cash early

Making quick cash savings at the start will fund longer-term savings and efficiencies, Mr Gaskell said. The two simplest ways to do this are to examine all invoices and stop paying for things that you no longer need and, if you own property, to sell it then lease it back. This can release cash within weeks or even days.

4 Get staffing right

Start with a tactical skills audit to clarify which skills the business will need to meet its goals. This will allow any redundancies to be made with more precision and will reduce the likelihood of getting rid of people you need, Mark Hoble, a principal at Mercer, an HR consultancy, said.

Review your redundancy policy and see if you can reduce the amount you spend per person; be aware that redundancies can actually increase costs in the short term.

Gerwyn Davies, a public policy adviser at the Chartered Institute of Personnel and Development, said: “It's better to look for early alternatives to redundancies, as it costs an estimated £16,000 to make an employee redundant.”

5 Watch performance

Good performance management systems can reduce costs by allowing companies to dismiss sub-standard employees; generally, this is much cheaper than redundancy, Mr Hoble said. Tailor performance incentives to reward employees who can show that they have cut costs and improved efficiency, Mr Davies said.

6 Tighten expenses

Even simple changes, such as not buying sandwiches for meetings, can save thousands of pounds a year.

Make sure that all staff know and understand company policy on mobile phone use, business travel and so forth, Glen Williams, head of performance improvement at Bain & Company, the consultancy, said.

Postpone capital investment; extend the warranty on your three-year-old laptops rather than buying new machines, for example.

7 Simplify

Many companies offer more products than they need to. See which can be scrapped - often up to 40 per cent can go, Mr Williams said.

Rationalising in this area should make production easier and more efficient, may mean that some equipment is no longer needed and that remaining equipment can be utilised more effectively.

8 Examine procurement

This should include an assessment of whole-life cost, not just the up-front price. “We find that if a company takes a systematic approach to reducing purchasing costs they can save between 5 per cent and 30 per cent,” Mr Williams said.

Renegotiate with suppliers, particularly where the market has changed; for example, it may be possible to get a very good deal when renewing a lease.

9 Spend

Sometimes you have to spend to save. IT programmes are often a target for cuts, the consultants James M. Kaplan, Roger P. Roberts and Johnson Sikes write in McKinsey Quarterly, “yet in some instances, IT investments deliver more value to a company's top and bottom lines ... than any savings gained from traditional IT cost-cutting.”

10 Put someone in charge

Make someone responsible for ensuring that cost-savings are captured, or money saved in one area will be spent in another, Mr Williams said.

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