Administrative expenses are not directly related to the production or trading activities of the organization. However, a reasonable modern business owner or top manager will not treat them as they did in Soviet times - that is, limit them as much as possible. A careful analysis of management costs is required to make informed decisions about these costs.
Instructions
Step 1
Administrative costs include not only the costs of maintaining automated control systems, accounting, legal department, HR, but also travel costs, hospitality costs, communication costs and the maintenance of structures that are not of actual production value. All of these costs can weigh heavily on the total costs, although they are not always appropriate. It is clear that there is no point in deeply analyzing such costs as the cost of maintaining structures. But consider the costs of maintaining some departments more closely, because they are more manageable.
Step 2
The effectiveness of the HR department is associated with increasing the rate of growth of the company, and therefore is analyzed first of all. Analyze the speed of paperwork, the number of closed vacancies, staff turnover rates. Compare all these indicators over time. It is often advisable to compare them with similar indicators of the corresponding methods of the previous year, because fluctuations in the labor market are seasonal. It is also advisable for the head to search for new HR specialists himself. The approach should be closer to the Western one, when a person is fired not because he does not work well, but because there is a better candidate for the position. An excellent HR specialist will solve many problems in the work of the company.
Step 3
When analyzing the work of the legal department, pay attention to how well-established the system of minimizing legal risks is, how efficiently and quickly lawyers cope with problem situations, and whether the help of freelance consultants is required. Also, the legal department can train employees in the basics of legal literacy. The cost of maintaining such a department pays for itself especially quickly if the company operates in a highly competitive environment and is constantly faced with the need to legally defend its interests.
Step 4
Evaluate the feasibility of hospitality and travel expenses by the number of actually completed transactions and the amount of profit from these events, various forms of public recognition of the company's merits, such as winning various competitions and receiving the title of "Best Company of the Year". If the company develops successfully and its prestige rises, the expenses for the mentioned goals are justified.
