How to control costs
1 Identify your major costs, such as staff, raw materials and other supplies, premises, utilities, travel, transport, capital expenditure and financing costs.
2 Decide which costs to control centrally and which should be the responsibility of individual cost centres (eg production, sales).
3 Involve employees by explaining what you are doing and encouraging cost-saving suggestions; consider offering incentives.
4 Establish cost budgets and monitor actual costs against budget as part of a systematic cost-control process.
5 Review how activities and costs contribute to achieving your business objectives and quality standards.
6 Benchmark key activities and costs to identify long-term opportunities for significant cost reductions.
7 Consolidate purchasing with a small number of suppliers and negotiate improved terms and discounts; check invoices for overcharging.
8 Eliminate unnecessary activities, duplication of effort and unnecessary waste; reduce obvious overcapacity.
9 Control excessive costs - for example, over-specified supplies, or always using first-class post.
10 Identify opportunities to improve efficiency; use technology where appropriate and consider outsourcing non-core activities.
11 Design products and production to use standard components and efficient processes; improve quality control to minimise waste.
12 Improve financial control; refinance expensive overdrafts with loans and minimise working capital.
13 Before making any changes, assess the potential downside, such as damaging morale, reducing quality or creating long-term vulnerability.
budgets and monitor actual costs focus on how activities and costs contribute to your
objectives negotiate purchase
skimp on costs that are
necessary leave yourself without any
flexibility fail to
invest for the future