Cost control: the response to the crisis
“Cuts”, “savings”, “costs” are words that we hear every day and at all hours, especially those related to the macro economy and the finances of the state, but they are also terms present in the family economy. “Cut” certain expenses at home … And, of course, in the management of any company, where it is vital to hit every penny we spend, but … How do we get this?
In these moments, getting financing for an SME is almost impossible mission, for what the ‘control of costs’ becomes even more essential, to analyze and optimize any expense that we make in our company and thus anticipate possible problems.
How many times have we heard, ‘this company died of success’, this can happen for different reasons:
• Do not assume your growth well.
• Lack of control.
• Not be able to quickly and dynamically elucidate which areas, products or services are more profitable and which ones less.
All companies do a financial analysis of their situation, but how many of them analyze their costs efficiently? To be really effective in our cost management we must take into account at least the following points:
• Our costs should be as small as possible, but always looking for efficiency and competitiveness, without forgetting Quality.
• Increase our knowledge regarding cost control by increasing our productivity.
• Identify and strengthen the actions that allow increasing the profitability results of the company.
• Automate the analysis process as much as possible, with a technological solution that allows us: automatic cost assignments by different criteria, distribution of indirect costs and structure by different units on direct costs, minimizing information processing times .
• Establish independent budgets by cost centers, nature of the expense, unit of work.
• Facilitate the collection of data from the different systems involved in the analysis.
On the other hand, all these data provide us with useful information to assess and evaluate stocks, plan, study the most appropriate sale price, evaluate performance, improve control and operational management, analyze different budget alternatives and possible deviations.
In companies with a productive component of certain importance, as is the case of agri-food companies, there are indirect costs that must be distributed by different criteria.
For example, in a horticultural company, we can get to know exactly the real cost per unit harvested.
In this process involved, the cultivation, production, marketing, distribution and different types of costs, land, maintenance, fertilizers, phytosanitary etc, we will have to distribute and pass for that calculation, if done manually the process is complex and cumbersome, if we automate it we will have the information immediately.
In the case of Ports, which pay their fees to Ports of the State based on their cost analysis, not having this process automated can mean losing a lot of money.
In the Port of Gijón after implementing a system of this type, not only do they know what rates they have to pay at all times, they also know perfectly the profitability they obtain, by line of business, by type of traffic (containers, passengers …), etc.
In summary it is an excellent complement to financial accounting that allows us to capture, record, classify, analyze and interpret income and expenses as an aid to know and improve productive activity and its effectiveness and is a fundamental tool for decision making, with a quick return on investment.
The high competitiveness, the constant evolution of the companies, the vertiginous transformation of the technical equipment used, the enormous expansion of the markets and as a consequence the permanent tendency to increase costs, make it essential to implement a cost management system, which , in short, what it achieves is to increase our profitability.
CEO Besoftware BSW
Article included in Vida Económica Magazine Control de costes: la respuesta a la crisis (pdf)
