Converting a portion of fixed costs to scalable expenses can improve cash flow as you start bringing employees back to the office, according to an analysis by remote-work company Motus.
Stay-at-home mandates have left 11 billion square feet of office space idle, costing organizations $54 billion, the company estimates.
It costs organizations $4,977 a year for each employee working in an office, the company says. Since that's treated as a fixed cost, any time space sits idle — even for routine job changes — you're paying for an asset that's providing no value in return.
That works out to an average $54,000 a year for every 100 employees, the company calculates.
Given these costs, it makes sense to keep as many employees as possible working remotely even after you get the go-ahead to bring them back, the company says, and in fact many organizations are planning to do that.
By some estimates, close to half of the office space that's been sitting idle for the last two months won't be returned to service. That means some 5 billion square feet of space will still be vacant by 2021.
Keeping a portion of your employees at home and downsizing your office space is one part of a strategy for replacing fixed costs with scalable expenses.
By keeping them home you free up cash but you also make your organization more flexible, says Ken Robinson, market research manager for Motus.
"By finding ways to convert fixed-cost assets to more flexible approaches, businesses can adapt quickly to unexpected or changing economic conditions," he said.
Other fixed costs that could be treated as scalable are phones and company cars. Instead of assigning these assets to employees, you can reimburse them for using their own.
It costs about $60 a year for each mobile phone line organizations provide their employees. There are other costs associated with the devices, including asset value depreciation. By replacing company phones with a reimbursement program, you can save $10,000 a year for every 100 employees, the company estimates.
Replacing company cars with a reimbursement program will save 21% in costs per vehicle, or $50,000 a year for every 100 employees.
To get the most out of a scalable cost program, you have to analyze your costs carefully, because they're going to differ widely based on where you are, the company says. You can't use a one-size-fits-all strategy.
"The cost of mobile phones, driving and office space all vary based on where an employee is located, and reimbursements should accurately reflect those differences," the company says.
Devoting resources to do the analysis could be worth it. As the pandemic has made clear, it's expensive to cover fixed costs as assets sit idle, so in converting those to scalable costs by replacing them with a reimbursement program, you can save money and operate more flexibly as an organization, the company claims.