Cost Management: A Budget’s Best Friend



Sometimes it may seem that escalating expenses always get the better of you. If your company comes up over budget year after year, you may want to consider cost management. This is a formalized, systematic review of operations and resources with the stated goal of reducing costs at every level and controlling them going forward. It can assist you in differentiating activities such as:

Are We Operating Efficiently?

Cost management can help you clearly distinguish activities that are running smoothly and staying within budget from the ones that are constantly breaking down and consuming extra dollars.

Depending on your industry, there are various metrics you can calculate and track to determine which aspects of your operations are inefficient. Sometimes improving efficiency is simply a matter of better scheduling. If you are constantly missing deadlines or taking too long to fulfill customers’ needs, you are also probably losing money playing catch-up and placating disappointed buyers.

Can We Really See our Supply Chain?

Maybe you have bought the same types of materials from the same vendors for many years. Are you really getting the most for your money? A cost management review can help you look for better bargains on the goods and services that make your business operate.

A big problem for many businesses is lack of practical data. Without the correct information, you may not be fully aware of the key details of your supply chain. There is a term for this: supply chain visibility. When you cannot “see” everything about the vendors that service your company, you are much more susceptible to hidden costs and overspending.

Is Technology Getting the Better of us?

Just about every business process has been automated one way or another. But are you managing this technology or is it managing you? Some companies overspend unnecessarily while others miss out on ways to better automate activities. Cost management can help you decide whether to simplify or upgrade.

For example, many businesses have historically taken an impromptu approach to procuring technology. Different departments or individuals have obtained various software over the years. Some of this technology may still be in regular use but, in many cases, an expensive application sits dormant while the company still pays for licensing or tech support.

On the contrary, a paid-for but out-of-date application could be slowing operational or supply chain efficiency. You may have to spend money to save money by getting something that is current and fully functional.

The term “cost management” is often applied to specific projects. However, you can also apply it to your business, either as an emergency step if your budget is not working for you or as a regular activity for keeping the numbers in line. Contact us for help conducting a cost management initiative.

CAPATA is a full-service accounting firm located in Laguna Niguel in southern California.

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