Cost management optimization: rules of working with expenses

Cost management optimization

First, you should divide all expenses on necessary and unnecessary. Examples of necessary expenses are monthly payments for electricity, fuel, employee payments, and those expenses that are explained by employees. Unnecessary expenses can be investments or status benefits.

One more way to reduce expenses is to get rid of equipment if monthly costs on its supply and maintenance support are higher than 1/36 from the cost of a new one.

One more reason to provide business process optimization in cost management is when an employee is not able to explain the necessity of certain expenses.

Finally, a company is able to decline the services of outside companies which can be fulfilled by the company’s own resources.

If you doubt if it is reasonable to reduce expenses on certain things, follow these four principles (use them to check whether you should reduce costs or not):

  1. Reduce expenses of the company, but do no harm to a customer (don’t make a customer suffer from your cost effectiveness);
  2. Provide transparency to accounting and monitoring of company expenses;
  3. The total cost of goods you buy for the company;
  4. Opportunity to turn your expenses into profits.

For example, very often most companies don’t need increased security; however, this expense item cannot be reduced as safety is one of prioritized aspect for customers.

Most companies have special financial services for cost control. Certain amounts of expense items which are recognized as necessary are included into the budget. And new items are added only after the procedure of negotiating. This helps to optimize business processes concerning budgeting and reducing of annual costs.

Try to avoid working with agents. If there is an opportunity to make a contract with a supplier itself, you can save a lot of time and money on it. Thanks to it, you will be able to buy new equipment for your company and optimize business processes in production reducing expenses on it.

All measures described above can help you to optimize cost management of your company. Optimization of business processes in cost management can reduce expenses up to 40%. You get an opportunity to systematize planning of cost planning, reduce time on coordination and to develop further mechanisms for business process optimization in other spheres of business. A company providing appropriate cost management is able to concentrate its resources on investments into internal projects development, into the management of objects of commercial property or into reengineering and optimization of business processes in logistics.

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