Cost Management – The Key for Business Sustainability

Narendra Kumar

03 Jul, 2019

In the present competitive scenario for any business to stay active and succeed it is important to closely monitor the costs incurring in the business and to find innovative ways to optimize them. Businesses need to adopt a robust and effective cost management strategy to avoid a complex situation. Start-up companies and SMEs quickly feel the pressure to curb costs. A proper cost cutting by the cost accountant helps in improving the bottom line in the short-term, which helps in improving the company’s growth in the future.

An effective cost management strategy is not dependent on the information available on the internet. Each business has its own way of doing business, implementing strategies and complexities in which they operate. So, it is very important to have a strong workflow for seeking professional help i.e. Cost Accountant.

What is Cost Management?

Cost management deals in management of businesses to operate in an environment of slower economic growth, to tackle the competition and high costs of capital. Cost management helps the businesses to get their act right with the resources available in hand which helps in optimum utilization of resources. This, as a result helps in driving profitability and gaining a good place in the market.

Additionally, cost management strategy plays a very vital aspect in the business, that ultimately helps in pricing the goods and services right. The pricing should not be as low, to leave any profit on the table; but not be that much high which ultimately results in losing the client.

Cost management helps in managing costs and aligning the business strategy of an entity. Challenging economic competition is the most critical part to by businesses today. To gain advantages in an increasing modern competitive market, Cost management (CM) and the strategies is an important prerequisite for an enterprise. In the 21^STCentury, Sustainable development is considered as the most significant societal challenges.

What are the key factors for sustainable growth?

Every company wants to grow their business, and make strategies to know how to sustain it for the long-term period. As sustainable growth refers to a growth rate which a businessperson can maintain without facing any internal and external problems. Sustaining growth requires a strong operational foundation – to reduce the risks to the business over time.

Why is it important to undertake Cost management?

Cost Management helps a business in keeping their over-all budget under control

It also helps businesses to monitor costs and increase profitability.

A cost management strategy is all about aligning all costs with long-term business goals rather than saving on variable costs only.

Through cost management, a basic monitoring process can help the business in identifying the major loophole in the business environment.

From the project undertaker’s point of view, it helps in facilitating appropriate management of the costs by making the project profitable.

What are the factors that affect cost management?

There are certain factors which are mentioned below affects the cost management

• Change in pattern and techniques of working.
• Global and domestic competition.
• Upgraded technologies.
• Change in the manufacturing and service sector.

What are the techniques of cost management which act a as key factor for sustainable growth?

There are certain techniques which are used through which the overall cost of the business can be controlled and maintained within the required limit. Advanced technology helps in implementing the cost management strategies and maintaining the quality of higher standards which reflects in the overall cost of the business.

• Management of time and inventory

It is of utmost importance in the business to know the value of time to view the desired results. Additionally, it is also very important to make the employees/workers understand the value of time and how more work efficiently in the same time period. Proper management to time will help in increasing productivity without adding to the labor cost.

Inventory is the major revenue generating resource in the business. It is required to keep a check on the inventory^[1] and stock that need to be stored which helps in avoiding the excess stock and inventory and deploying the working capital elsewhere rather than investing in the stock.

• Outsourcing the work

Outsourcing the work saves the employers cost and is done keeping in mind that the outsourcing is up to such standard that is does not hamper the quality and services of the customers of the business.

Also Read: 10 Benefits of Outsourcing Accounting Services

Additionally, certain projects also can be outsourced, which helps in saving employee costs which occur onboard as well as to get access to outside talent and technology.

• Keeping a recent check of the market sense

To get an update about market trends, it is important to be in touch with the vendors and the change in price trend which helps the businessperson in finalizing the price and also in negotiating with the other party.

Conclusion

Cost management helps in controlling the project cost and expenses initially which ultimately helps to work towards the expected revenue. It also helps in analyzing the trends of the business i.e. long term and short term.