Effective Cost Management- The Pathway to Sustainable Value Creation and Business Prosperity

Every business is out to maximize on revenue and optimize its profits. This fundamental truth is approached through different business models employed by both small and large enterprises. However the bottom line is that for a business to prosper, it must boost its revenue through increased sales and at the same time manage its costs effectively. Cost management is arguably one of the critical aspects any commercial establishment can pursue in generating value both in the short and long term.

Identification of the Current Cost Structure

The first step to effective cost control is through analysis of the current cost centers. This will give you a picture of where the major cost burden lies. The cost analysis should be done throughout the entire business process chain starting from purchasing, to production to sales and marketing, and support functions. Once you identify the costs, rank them from the biggest to the smallest. This will help in deciding the costs to target and the impact they will have on your bottom line.

Optimize Your Human Resource Costs

The costs incurred in hiring staff, training and maintaining them in your payroll is among the highest in any business. When left unchecked, this can significantly affect your revenues and entire business profitability. The good news is that there are innovative ways you can use to bring this cost element down.

One of the options you can settle for is hiring of an intern. Many colleges have internship programs that you can tap into in exchange for a small fee or college credits. These temps can be helpful in filing and clearing data entry backlogs. Hiring virtual workers can also guarantee you professional services at a fraction of the cost. Sites such as Odesk, Freelancer and Elance have great contractors you can hire for short durations.

Realign and Minimize On Your Purchasing Costs

Co-opetition refers to an arrangement where you pool your purchasing power with other players in your business niche in a bid to cut down on your purchasing costs. This plan could also open up opportunities for quantity discounts especially where you purchase bulky supplies. There are lots of big box retailers and wholesalers out there who give great discounts to small business like furniture for your office and other office supplies but you have to ask for it. Remember, you have nothing to lose by bargaining on your purchase. Ballooning of purchasing costs can also arise from frequent purchases. To cut on this, you need to plan your purchases based on your demand forecast.

Embrace Green Technologies

The reality of green house warming is here with us and cases of dwindling worker productivity are on the rise. Green technologies will help you enhance your work environment and save you lots of money. One of the latest and innovative solutions is the use of container shelters. These are structures that are easy to install and dismantle constructed using state of the art technologies. They have lots of benefits they could pass to your business including energy costs reduction. This is because they use UV stabilized fabrics that allow filtered natural light to penetrate. This reduces or even eliminates the need for day lighting.

In addition, container shelters also guarantee you a quiet work environment by shielding out the surrounding noises. This enhances your concentration and productivity. Adopting paperless operations through the use of online facilities such as Google Docs, Dropbox and Amazon Cloud Drive can also help bring down your administration costs.

Work With a Budget

Cost overruns have been responsible for thinning of revenues and eventual closure of business operations. To arrest this problem, you need to have a well defined budget that incorporates all the cost aspects and the revenue items. This will give act as your roadmap showing you how far you can stretch in terms of expenditure. By keeping the business costs below the revenue line, you can rest assured that you will always have a financial cushion. 

In preparing the budget, you have to be as objective and accurate as possible. Be sure to capture every cost element with precision. Also cultivate the discipline of sticking to the budget even if you are tempted to stretch a little bit.

Successful cost control can be the only weapon you have to fight off your competition and stand out in your niche. You therefore need to use it wisely and where possible, assign a professional to manage this sensitive docket.