Cost management in business as the word implies, is the process of controlling the resources available to run a business.
The amount of money that a business utilizes to function progressively should be monitored and well-managed. A good budget is always needed. This will not only help to curb extravagant expenditure and encourage prudent spending, it will also ensure profit increase.
The image above is a helpful approach to ensuring that proper management of costs in a business.
It is important to plan, analyse and track cost, and make informed decisions on purchases and expenditure. Here are 10 effective strategies for managing cost for small businesses.
- Plan ahead
- Make up a reasonable and detailed budget.
- Cut down on overhead and running costs e.g rent, electricity, transport, telephone bills, etc. Define the fixed and variable costs.
- Utilise online tools and software.
- Advise and train members of staff to be economical in the use of resources.
- Hire to fill relevant roles, and outsource tasks that are one-off.
- Take inventory frequently, and track expenses.
- Review costs and expenditure regularly, and minimise where you can.
- Seek out different suppliers and manufacturers of goods, and compare prices before purchasing.
- Plan for contingencies.