14 Dec Cost Control An Ongoing Task
Cost control strategies should be part of an ongoing activity, not just considered once a year. A good idea is to create a checklist of the key costs being incurred in the business with an analysis being performed on the cost and reviewed on an ongoing basis to see whether value for money is being obtained.
In some instances, it may be found that it is necessary to increase the amount of money that a business is spending under a particular cost heading, so as to get a significant improvement in value for money. If this helps the overall performance of the business and bottom-line profitability, then that additional expenditure is money well spent.
However, in most cases the ongoing costing review will be centred on an analysis as to whether the incurred cost is still justified and whether the business is receiving the best possible deal from the suppliers of the product or service
When undertaking a review, it’s a good idea to ask a question “Why are we incurring this expense?”
Is it necessary that the business incur this expense so as to continue to service your customers at the highest possible standard? Or is it an expense that is frivolous and a luxury in today’s market that your business could do without?
Is the product or service being acquired of superior quality to that required to meet your customers’ requirements? Are you buying a “brand name” when that is not necessary?
Many small and medium sized businesses have established a cost control review committee which meets throughout the year to consider the various costs that have been incurred by the business and, after some investigation, to determine whether that cost should still be incurred or whether changes can be made to the type of product or service that is being acquired, so as to reduce the overall cost impost to the business.
A dollar saved in purchasing of products or services goes directly to bottom-line profitability of your business.
If you would like to discuss a strategy of how savings can be effected within your business, please do not hesitate to contact the accountant in our organisation with whom you normally deal.