Strategies for cost control are a part of financial management. However, as a concept, you don't need to be a finance brain-iac to understand it. Here is some information on how these strategies work in synchrony with the economy which may prove useful, and an overall understanding of the concept.
Cost Control Definition
As per the business dictionary, cost control can be defined as, "Application of
(1) investigative procedures to detect variance of actual costs from budgeted costs,
(2) diagnostic procedures to ascertain the cause(s) of variance, and
(3) corrective procedures to effect realignment between actual and budgeted costs."
In simple terms, it is a procedure to see if the company is spending more or less than its budgeted amount. If yes, then to know the reason behind the increase or decrease of expenditure. Further, it works at finding a way to make the actual cost and the budgeted cost meet. Cost control management also takes care of the same arena of work.
Cost Control Methods
Now that we have seen the basic definition of cost control, how will we go about doing it. Such as, one can keep an eye over the numbers, but how can one go about controlling them? Here are a few techniques and measures that one can use to keep the cost in control.
Do not have a very big team overlooking the finances
Why do most companies have small finance teams? Because, the smaller the finance team, the lesser the disparities and misunderstandings. Make sure that all the checks are approved by one authority. This will help keep the expenses in control.
Frugality is often required. One needs to be wary of spending more than required. Make sure that you choose the least expensive option at all times. Make sure that when traveling, modesty is maintained.
Control salaries and overheads
Keep a tight reign over salaries and overheads. Review the monthly overhead expense in comparison with the budget. Promise bonuses rather than salary hikes. Hire part-time personnel during summers and interns during internship seasons.
Find different and less expensive ways to get certain jobs done. Get the suppliers involved in the cost-cutting strategy. You can opt to team up with another friendly company in order to avail economy of scale. Sell excess supplies to smaller firms. This will help at reducing dumpster cost. Make use of cost control software to ensure more work in lesser time and man power.
All these methods can help reduce the cost and maintain a higher profit margin. However, there are a lot of indirect costs that also need to be kept in check. Mostly, miscellaneous expenses are ignored. However, if the management chooses to keep this miscellaneous expenditure in control as well, the overall difference on the cost will be much more. This is where I sign off!!