How to control costs


  1. 1 Identify your major costs, such as staff, raw materials and other supplies, premises, utilities, travel, transport, capital expenditure and financing costs.
  2. 2 Decide which costs to control centrally and which should be the responsibility of individual cost centres (eg production, sales).
  3. 3 Involve employees by explaining what you are doing and encouraging cost-saving suggestions; consider offering incentives.
  4. 4 Establish cost budgets and monitor actual costs against budget as part of a systematic cost-control process.
  5. 5 Review how activities and costs contribute to achieving your business objectives and quality standards.
  6. 6 Benchmark key activities and costs to identify long-term opportunities for significant cost reductions.
  7. 7 Consolidate purchasing with a small number of suppliers and negotiate improved terms and discounts; check invoices for overcharging.
  8. 8 Eliminate unnecessary activities, duplication of effort and unnecessary waste; reduce obvious overcapacity.
  9. 9 Control excessive costs - for example, over-specified supplies, or always using first-class post.
  10. 10 Identify opportunities to improve efficiency; use technology where appropriate and consider outsourcing non-core activities.
  11. 11 Design products and production to use standard components and efficient processes; improve quality control to minimise waste.
  12. 12 Improve financial control; refinance expensive overdrafts with loans and minimise working capital.
  13. 13 Before making any changes, assess the potential downside, such as damaging morale, reducing quality or creating long-term vulnerability.

Cardinal rules


  • set budgets and monitor actual costs
  • focus on how activities and costs contribute to your objectives
  • negotiate purchase prices
  • involve employees


  • skimp on costs that are necessary
  • leave yourself without any flexibility
  • fail to invest for the future