Tmerno
Having control of your business is one of the fundamental prerequisites for the success of the enterprise, regardless of its size or market segment. And this doesn’t just refer to knowing your product, target audience and managing a team.
Although all of this is very important too, controlling your company’s numbers is something you must have. In other words, know your expenses and know how to manage them, otherwise it means that you don’t really know the true situation of the business.
Therefore, you must learn everything about cost management: what it is and how to do it , to carry out competent and comprehensive administration of your enterprise. So, continue reading this article and check out the following topics:
– What is cost management
– How to manage costs
– Tips for managing costs
– Why manage expenses
– ERP software to manage costs
What is cost management
The concept of cost management is quite simple and consists of managing your company’s expenses. However, more than knowing what the enterprise’s expenses are, management means having really necessary costs, being able to pay them and reducing them when possible.
It is also necessary to know that costs are all the expenses involved in the day-to-day running of your company, both the higher-value ones such as rent and salaries, as well as the cost of an all-day coffee. That is, it encompasses fixed expenses and variable expenses.
Even though the importance of following all of this is obvious to many businesspeople, not everyone has the same vision. Nowadays, many companies close within a few years of opening and even within a few months.
Just an innovative idea or a quality product does not keep a business running, and the basics must be done – know and manage expenses. However, as not everyone does this, their businesses fail early.
How to manage costs
The first step in managing costs, therefore, begins by identifying what all your business expenses are. Start by listing them. See below what are the most common costs in companies:
– Rent;
– Inputs;
– Electricity;
– Water;
– Telephone;
– Internet;
– Transport;
– Salary;
– Overtime;
– Equipment maintenance;
– Taxes;
– Commissions on sales;
– Food;
– Office supplies;
– Cleaning material;
– Etc.
This list can be made in a spreadsheet, although there are more appropriate resources, such as those that can communicate with your company’s other information, making cost management more efficient. In any case, you must list everything, without forgetting anything.
Month by month, this list must have updated values, as some of these items may have small differences. Other topics, in turn, can vary greatly, including production expenses, which are part of variable expenses.
Tips for managing costs
With this list always updated, the first step of cost management is completed, that is, having control, knowing where the money that enters your business goes. The next step is to evaluate these expenses one by one.
Analyze whether it is in accordance with reality, can be reduced, etc. It is not necessary to wait for your company to experience financial problems to carry out this expense study, as by carrying out this analysis you will be preventing future instabilities.
Companies that thrive, even in times of crisis, are not those that start spending less when they notice problems. But yes, those that maintain a permanent expense reduction policy.
It is also essential to avoid waste and constantly look for ways to have lower expenses with intelligence, that is, without letting this affect the quality of your product, service or the appreciation of your team.
Although cost management must be done from the start of the business, it is never too late to start. If your company is experiencing difficulties, this business management tool is very useful to indicate where the problems lie.
Why manage expenses
Cost management offers a series of advantages for companies that include it in their work routine. Among them, it is possible to highlight the following:
– Make better pricing and, consequently, have more confidence in determining the profit margin of each product or service;
– Have a more complete understanding of the performance of the company’s different activities;
– Rely on greater assertiveness when planning and developing operations;
– Access complete and updated information to make the best choices;
– Decide the most appropriate time to expand the business;
– Be prepared for financial instability in the market;
– Reduce expenses and increase profits;
– Offer quality products and services;
– Provide specialized service;
– Identify when the company is at a loss.
As you can see, the benefits of cost management appear in several ways. This is because, when you have control over your expenses and make the best choices, you can invest in what really matters and leave unnecessary expenses aside.
However, it is essential that all expenses are considered, including inventory losses, which are not always remembered. After all, if there was an expense purchasing goods that were not sold, this loss should also be included in your list of costs.
