Even if you have a dedicated finance team that understands the cost accounting process, actually identifying the most effective ways to reduce spending can be challenging. Cost control is one of the best ways to keep your business in shape so it continues to perform well in a variety of economic environments.
The four strategies outlined below are good first steps toward reducing overhead expenses and achieving cost control.
1. Hire the right people
Taking a careful approach to all steps in the hiring process — from recruitment to onboarding — is one of the most important cost control measures. Bad hires are expensive, and an employee who can't keep up with work demands takes a heavier toll on a business than some may think. According to research from Robert Half, managers spend more than 10 hours out of every 40-hour workweek coaching underperforming employees.
Finance executives also acknowledged that hiring mistakes negatively affect team morale. Of the CFOs surveyed, 91 percent said poor hiring decisions affect morale at their companies.
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2. Negotiate annual contracts
If your business is anything like most other enterprises these days, you work with a variety of third-party vendors. The contracts with then are a great place to look for long-term cost control measures. Multi-year contracts will usually favor the supplier, so if you can reopen the contracts to annual bidding, you might be able to lower your cost of goods.
3. Build strong relationships with suppliers
Another important step in controlling costs is to be diligent about staying on top of your expenses. Putting off payments until the last minute or past the scheduled due date will only exacerbate costs in the long run. These practices are also likely to damage the relationships you have with your suppliers.
Instead, the best approach is to pay your invoices as early as possible. Another potential benefit: Organizations that enjoy good relationships with their suppliers may also have more leverage when it comes time to negotiate.
4. Use cloud computing as a cost control
Technology has advanced in such a way that your employees can be just as productive as ever — and perhaps, even more so — by relying on cloud-based servers to access data and use software. As more people telecommute and collaborate with colleagues in different regions, cloud financial solutions are fast becoming ways for organizations to enhance efficiency and reduce overhead costs. The cloud provides round-the-clock access to business data, and financial Software-as-a-Service programs can give firms greater flexibility.
Want to help your company’s bottom line? Cost control, whether it's through hiring, supplier contracts and relationships, or cloud technology, can impact your profits over the long term and position your company for success.
If you're looking for more ways to take a fresh approach to cost control, here are five more strategies to consider.
