Cost Management Can Come from Some Creative Solutions
Cost management can be tough. It is a continuous process - not just a yearly or quarterly project. CFOs and financial managers often have a very difficult task when it comes to continuous cost management. Not only must these executives handle the daily financial operations of the organization; they must serve multiple roles, adding an even more complex layer to their positions. This makes it difficult for cost management to become a priority for many companies.
For most businesses, cost management takes the form of yearly or quarterly budget cuts - and that's it. But cost management should not be based solely on making cuts. Cost management should instead focus on continuously containing expenses so that the high-stress situation of deciding which departments are down-sized or even eliminated can be completely avoided.
The main idea behindcost management is to eliminate waste. Examples of this include keeping less inventory on hand, eliminating paperwork, streamlining administrative processes and cutting overhead expenses when possible. Technology can play a major role in cost management. RFID technology is one example. This technology can help a hospital maintain records of medical supplies and help keep replacement costs down. Another example could be the local YMCA using RFID technology to manage its towel inventory. Towels are a big expense. If a member takes the towel home, the YMCA can charge them for the removal. In the industrial world, using an automated vending machine or tool crib for tool distribution can aid in streamlining. By using an automated crib system, overhead costs are reduced through a more efficient distribution method. Systems like these not only help manage inventory, they also cut down on overhead and paperwork. Often, the upfront investment in the inventory system results in huge company savings in the long run.
An outside cost containment firm can also help companies create a plan to manage expenses. It is often more affordable to work with a cost containment specialist than people realize. Cost management specialists are paid based on performance. If the specialist does not succeed in finding a way to reduce expenses, there is no fee to be paid. If the cost management firm does find ways to improve a business's financial performance through cost containment, the specialist is paid a percentage of the money saved -- and the client still saves thousands of dollars as a result of the analysis.
Cost management can be difficult to maintain on a continual basis, but applying some of the tactics mentioned above can help companies save money and work more efficiently.
About the Author
Alliance Cost Containment is a national service firm that reduces the indirect operating expenses for organizations within a wide range of industries. ACC offers to its clients cost management strategies in over 30 common expense categories. Find out more about Alliance Cost Containment at http://www.alliancecost.com .
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