Cost reduction is an effective way to increase the company's profits, therefore cost management is given a special place in financial management. It is necessary to reduce costs gradually, while the economy strategy should be implemented at all levels of management.
Instructions
Step 1
The economy strategy must be fully justified. Before deciding on the reduction of certain types of costs, it is necessary to comprehensively analyze all the costs of the enterprise, to consider the dynamics of costs for several reporting periods. If an increase in costs is found, then it is necessary to determine its causes. The increase in costs can be objectively determined, for example, it can be associated with an increase in the cost of resources.
Step 2
At the next stage of cost management, there is a search for reserves for reducing the cost, you can go along the path of optimizing production or management costs. Very often, the company finds precisely reserves for reducing the costs of production and sales of products. To reduce the cost of raw materials and supplies, you can try to analyze the pricing policy of your suppliers, renegotiate the terms of contracts, or find a new supplier who can provide resources at lower prices.
Step 3
Quite often, the analysis reveals reserves for reducing overhead costs. Overhead costs are not directly related to the production process, they are generated in the process of servicing the production and circulation process, for example: transportation costs, communication costs, electricity and the Internet. To reduce transport costs, outsource some of the functions to a specialized transport company. To reduce communication costs, it is necessary to reduce the number of employees who are paid for mobile communications at the expense of the company, as well as to limit long-distance calls. To reduce energy costs, it is necessary to implement a comprehensive energy saving program throughout the enterprise. In some cases, advertising costs can be reduced. The advertising budget needs to be reviewed if advertising costs are ineffective and do not generate additional income.
Step 4
In large manufacturing plants, waste costs can be incurred. To reduce such costs, it is necessary to analyze in detail the technological process, find the main causes of defects and try to improve technological discipline in production.
Step 5
Another effective, but often painful, way to reduce costs is to cut the wage bill. It is possible to reduce labor costs by lowering salaries or reducing staff. Consideration should be given to downsizing some departments. Some types of work can also be outsourced.
