Effective cost management is the core of accounting in any business undertaking or organisation. Cost management is a comprehensive area that includes effective strategy implementation while also furnishing the facility and process to ensure the highest possible level of quality and production at the minimum cost. Cost management could also be defined as the process of optimising performance at the minimum cost.
The primary objective of any business or company doing business is to generate more revenue and maximise profits, and this can be possible only if expenses are optimally minimized. One basic fundamental of cost cutting is increasing revenue realization faster than expenses growth. Your income should be more than your expenses and then, only then, can you be assured of profits.
You must establish the goals of the organization and clearly define your ideas and aims. A clearly defined strategy will help you determine how to increase your market share which will give an edge against your competitors.
With the advancement in technology, no company can over look the benefits they bring. Create a website for your company and increase your visibility to the potential clients – it’s cheaper and faster than the conventional sales strategy.
Reducing utility expenses and administration costs such as electricity, copying, telephone, and office supply expenses will have a substantial effect on your profit figures. You can cut travel costs by controlling unnecessary and unwanted travel expenditures by adopting video conferencing for meetings and encouraging staff to minimize travel wherever unnecessary.
You can also try to consolidate your operations to a single office and lease out the extra office space, and an even better idea would be to lookout for and move to a more affordable location after renegotiating better lease terms.
Minimizing power consumption by turning off lights and other electrical appliances when not in use will definitely bring down your cost.
Another new cost-effective measure is outsourcing. If any particular department or sector does not have full time work, there wouldn’t be any point in having full time staff. You could go in for temporary services or opt for outsourcing. Either of these would be advantageous to the company.
One of the important angles that needs to be kept in check is risk management. Ensure that you take care of the physical assets in your office and ensure that it is protected from lightning strikes by installing lightning rods. Make sure that your office is well protected from natural disasters by taking all possible measures to protect human life and physical assets from damage.
Ensure that you make all the mandatory payments on time, such as paying income and other taxes, and insurance premia. Non-payment of these mandatory payments may result in your company having to pay heavy and hefty fines. Non-payment of insurance premia may result in your insurance claim being rejected, in case of any accidents or natural disasters.
Adopting of the above strategies would definitely result in a more profitable organisation.
Effective cost management is the core of accounting in any business undertaking or organisation. Cost management is a comprehensive area that includes effective strategy implementation while also furnishing the facility and process to ensure the highest possible level of quality and production at the minimum cost.