What is cost management for business?

Cost management is the process of planning and controlling the budget of a business. Cost management is a form of management accounting that allows a business to predict impending expenditures to help reduce the chance of going over budget. It includes managing the costs of goods sold and overhead costs.

How can you use cost time management strategies for success?

Your business insurance costs go up 10-20 percent per year. Your business has grown and you need to rent a space to keep inventory. Small businesses are being constantly squeezed by increases in expenses, so controlling costs is more important than ever. Follow these steps to reduce your business costs and improve your profits.

1. Create a budget for for your business. This includes calculating start-up costs,

2. Create and stick to a budget for for specific business activities, like “online presence”, “marketing and sales”

3. As they happen, keep records of all expenses and make sure they stay in line with the cost management plan.

4. After each activity is completed, compare the predicted costs and actual costs to help future cost management predictions and budgets.

Tips to reduce costs (of goods sold) and overhead costs

Checkout some other ways you can further reduce costs!

• Don’t take on unnecessary debt.

• Cut overhead costs

  • Use technology for meetings. Virtual meetings help minimize travel expenses and virtual offices can eliminate the need for physical space. While we certainly don't want to eliminate personal contact altogether, save it for the instances when it's most beneficial. We recommend free platforms like Google Hangouts- Meet and WhatsApp

  • Manage your time and your employee’s time. Remember, wasted time equals wasted dollars.

  • Go paperless. The cost of paper, ink, mailing supplies, and postage may seem minimal at times, but it can add up to a large business expense. Digital invoice and bill payment system, and filing all important paperwork on your computer can help you reduce some of the most common recurring business costs.

  • Save on marketing - get customer referrals and word of mouth.

    • Recommendations from current customers is far more likely to result in a sale than traditional marketing

    • Increase social media use and reduce traditional marketing.

  • Consider running your business from home

    • Rather than waiting to raise cash to rent office space that will later be used as the business premises, it is advisable to run your business from your home or reach out to a friend or anyone who has a free room and use it to run your business.

    • Too large for home? Get the most out of your rented space - sublease unused space to another business or individual

• Cut operation costs

  • Try selling leftover materials like cardboard, paper and metal or consider ways to use your waste to create another product.

  • Track and measure the operational efficiency of your business

  • Don’t invest in new equipment. New equipment is very costly and anyone especially struggling business owners should never go for them. Consider buying used equipment or leasing it.

• Check your business insurance rates: Compare other providers for the most competitive rate, then ask your current insurance provider to match that rate.

Why is cost management important?

With a new business, even the smallest reduction in expenses can have an impact on profitability. It's often simple, common sense activities that improve the bottom line. Reducing your costs improves your chances to succeed and become a successful entrepreneur.

Pro Tip

Negotiate everything. Whether it’s suppliers, consultants or customers, or credit card companies, put your negotiation hat on. Share your budget constraints and negotiate products, services and payment schedules to meet your budget. Worst case, they say no - best case you’ll get a much better rate, so you might as well try!