post by
Danny Ascari
Stefano Chelli

In the article “A revolution called remote workingwe have highlighted how its introduction into the company, often considered a real revolution, may affect different business areas, including the costs.

In this paper, we analyze the impact of working from home on the income statement, in terms of cost reduction.

Although the general belief is that a lot of money can be saved with this way of working, we have not found a structured approach to this issue, especially in SMEs. On the other hand, we believe that the subject should be approached in a methodical way, aiming to seek savings opportunities, without waiting for them to come to our attention. As always, being proactive pays off.

Therefore, it is necessary to be analytical in checking each cost item. For example, if we consider "general and administrative" expenses, it is necessary to understand any possible correlation between remote working and its potential savings. Please note, in this analysis we do not make any assessment of the labor efficiency or effectiveness of the personal.

Let's look at some examples that make the above concept clearer.

 

General and administrative expenses

Let's start by looking at the costs related to the workplace within a company: the physical space, the table, the desktop printer, etc. (probably already amortized, but not always). Then, the costs related to furniture, rents, utilities (electricity, gas, water). But not only.

Less presence in the office means having reduced costs for each input item (from coffee and mineral water to stationery items, etc.). But it also means less need for cleaning and surveillance (for those organizations where the flow of people in and out is continuous).

Furthermore, dematerialization linked to digital brings with it the concept of abandoning paper. Here, among the dying costs, there is also the chapter on printers and accessories (especially paper and toner).

Then there are the costs associated with renting office space or parking spaces in condominiums, garages or similar.

Finally, there are the costs related to the employees' meals (internal or external canteen, meal vouchers, etc): in this case, these are costs that must be reparametrized to the changed needs, but still downwards. 

Selling expenses

In this area of the income statement, we find all the cost items that companies face to promote their products and increase the sales. Some activities that seemed immovable before the pandemic were wiped out by the virus: fairs, conferences, on-site demonstrations, commercial employees and area managers always on the move around the world, with all the costs that these events entailed.

The pandemic eliminated them for everyone, so there's no competitor’s problem: they, like us, must equip themselves in other ways. Also in this case, the winner will be the one who is able to find better solutions to continue selling as before, but spending less on commuting to work, business trips, accommodations, food and ancillary costs (digging into budgets, these expenses often end up being more relevant than expected).

Production costs

In principle, remote working does not affect this type of direct cost, as it is not possible to adopt it in production. But if we look at the indirect costs of production, linked, for example, to the maintenance of machines or the calibration of measuring instruments, we find that it is possible to activate remote intervention methods, saving, at least, the travel costs of technicians in charge of these services . Machines and equipment are increasingly accessible remotely, as this is one of the requirements of Industry 4.0.

This is an approach that goes beyond telecommuting and reinforces the concept of economics related to digital technology.

 

Rising costs

We need to emphasize that remote working, in addition to savings, brings with it new costs for the company, related to carrying out work in the worker's home: connection costs, cyber security technologies, devices (PCs, notebooks, smartphones), etc. However, these costs, in addition to being much more affordable today than they were in the past, are not only linked to remote work, but can be passed on to other cost items. Therefore, when carrying a full analysis, costs and savings must be considered pro rata. Furthermore, if we think of a growing company, the costs of a new workstation set up in this way are not even remotely comparable to the costs of setting up a complete workspace per person in the company.

The Cloud, which represents the space where you can find the data needed for work and where employees can "meet", organize meetings with suppliers and customers, exchange or share all kinds of documents, images and videos, is not free, but its costs are not comparable with those of when everything was done face to face.

Finally, among the rising costs there may be others linked to social security or services provided by the company, such as food vouchers, always depending on national or business contracts.

 

In conclusion

One American study among many (Telework Research Network, source: PGI) estimates net savings of about $10,000 per employee in 100% remote working. Certainly for an SME the savings are less striking, but it depends on the sector in which they operate and on the level of technology and organization from which they started: the savings would be greater if the company were in year zero of the digital transformation.

This is another point to reinforce that SMEs have a great opportunity to seize: entering the path of process digitization, going through remote working and exploring the cloud along with all the technologies that contribute to digitization, means evolving towards the future to increase the turnover, but also save money.



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