How to manage operational costs
Controlling money and cost entails a constant review of the budget to tailor-suit what really has to be spent as spelt out in the forecast. This is to help manage the funds of the business better and ensure value for money, without comprising profitability.
After budgeting for the specific operations of the enterprise, what management needs to do is to properly align all expenses to the actual needs of the business activity and accurately document all costs incurred viz-a-viz budgeted to see if expenses are configured according to the availability of funds.
The end result should translate into an effective cost management procedure that enables the firm to break even and even go beyond to reap the targeted profits.
By properly adopting a disciplined approach in managing operational costs, strategic objectives and return on capital would be maximised in the wake of stiffer competitions and higher tariff regimes, which all hamper smooth business operations.
Knowing what to do in this regard, can therefore be rewarding and could be seen as a proper way to manage the business expenses.
Mind Your Petty Cash
Being economical with your petty cash can tremendously cut back on waste. This will facilitate reaping of profits rather than losses. If care is not taken, routine and daily purchases may result in highly unexpected expenses that may not have been budgeted for.
To avoid this, tailor cash adequately to the necessary purchases. If this matching order is done, there will always be funds available to meet specific needs as planned for.
Being timely with the recordings of your expenses as and when they occur will enormously help to track where all the costs are coming from. If a pile of invoices is left and other purchase documents unrecorded and unfiled, there will be a mess, making it difficult to get information on the debt stock of the business at any given time.
This puts the accounts off gear, making it almost unreliable. Remember that statutory obligations largely depend on the accounts and its inadequacy can trigger higher penalties and extra costs to be incurred.
Deploying accounting software such as QuickBooks, Tally, Topaz, as well common tools as the Microsoft office suit in excel, can greatly model out a good tracking system to help in managing expenses.
These packages simplify the recordings and help point out when going off the borders of the budget. Have a look at your operations and go shopping for the right package that can best fit into your activities.
Track and monitor your output
Constantly monitor the output and revenues against expenses and see if they are within reach. Do this by using the adopted software. This could be daily, weekly, monthly and even quarterly before the year ends. If there are indications of negative deviations, track back and redirect energies to go by the planned activities.
Do not mix up
Never jumble personal expenses with that of the business. Doing this could unnecessarily implicate the accounts and blur the focus of the business as to where to match costs to business revenues.
That could raise eyebrows on the cost of operations, even though that might not be the case. Just stay focused with each cost path.
Reduce the weight
In trying to manage cost, match actual business needs to expenses and do not overspend per the budget. This will help to improve the profit margin and ensure the maximisation of the shareholders’ wealth.
Just cut back on unnecessary expenditure if they really do not add up to the fortunes of the business. By so doing, the monitoring and tracking efforts will greatly pay off.
Turning expenses into real gains cannot be overemphasised. The onus, however, lies on those concerned to consciously apply what is prudent to realise this objective.
Article by J.E.Crentsil (Jnr)
The writer is a Business and Financial Analyst.
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