Successful cost management is one of important factors contributing to your competitive advantage.
With the increasing pressure to maintain or even improve your margins, you will certainly develop strategies and determine action plans for achieving this objective. Finally, your strategies will aim to increase revenues and/or to reduce costs, most probably it will be a combination of both.
For your business development you will certainly need to work on further improving your understanding on consumer needs in order to enhance your products / services portfolio and generate additional revenues. However, you simply can’t afford forgetting the cost or having a bad cost management.
If you do nothing, the cost will increase… If do something resulting in a bad cost management, the cost will increase… There are so many mechanisms pushing the costs up. In many cases these costs are not contributing to your top-line at all and they just keep eating your profit… Simplified, while one additional euro of your revenue will increase your margin (profit) with only a fraction of this amount, one euro of cost reduction is directly increasing your margin (profit) by one euro.
In the companies which are not structurally capitalizing on their opportunities in relation to the costs, we usually see a number of signs typical for lousy cost management. Where do you stand in relation to this topic?
THE SEVEN SIGNS:
1. Your Managers (and you?) don’t understand their cost base
2. You don’t know where you stand
3. Budgeting is a game
4. You hope your annual cost will be OK
5. Cost cutting exercise is catching you by surprise
6. Substantial purchases done outside Procurement department
7. Your people don’t know and/or don’t care