The control of the expenses of a company is one of the crucial aspects of any organization. If we had to reduce our company to three key points, this would undoubtedly be one of them. This is a subject that is talked about a lot in these times of crisis, but the control of expenses of any company should not be done only in times of recession, but it is a financial strategy that should be applied normally to achieve greater benefits and thus avoid the absurd expense that exists in many companies.
To this control company expenses, we must add a reduction in the costs that a company has annually, but for this, it is first necessary to be clear about the different expenses that are generated, since they are fundamental elements to ensure the future of any company.
A well-managed company must have analyzed its expenses in a very detailed way and understand and control, not only how these impact its business, but also how they develop with changes and especially today with reductions in business.
Regarding the types of expenses, we find that a company can divide its expenses between variable expenses, fixed expenses, marginal expenses, mixed expenses, direct expenses, indirect expenses, and cash expenses these are the ones that impact the benefit but They do not imply disbursement by the company. All of them are important for the control of company expenses.
Variable expenses are the load borne by the company whose amount depends on the level and rhythm of the activity. Are they different from fixed expenses, are they those that vary according to the level of production, such as raw materials, direct labor, etc? This type of expense increases when sales increase and decreases when said sales decrease.
Fixed expenses are those that do not change if sales increase or decrease, such as rent, taxes, telephone, etc. And that they exist even if the company does not produce them.
The marginal cost is the cost of producing an additional unit, this cost depends on the technology used in the production and the prices of the goods used for the production of the additional unit.
Mixed expenses are those that have a variable part and a fixed part, such as a salesperson who receives part of the fixed salary and another part for commissions based on sales.
Direct expenses would be those derived from the production of goods or services.
Indirect expenses are those necessary for production but not directly incurred in it.
Many companies know where the money comes in but are not clear where it comes out. So it’s important to review all expenses regularly to be able to find ways to save.
And what can I do in my company?
Some proposals to achieve control of company expenses and improve cost-efficiency are the following:
- Have an expense budget month by month and try not to exceed it.
- Raise awareness among employees so that they help us not to waste and with new ideas to increase the efficiency and productivity of the company.
- Reward / motivate employees to achieve greater economic savings for the company.
- Agree on better discounts with suppliers, regularly evaluating their contracts. Don’t be afraid to negotiate.
- Set objectives to control expenses that are achievable, rewarding at the end of each month the department that manages to cut the most expenses.
- Applying teleworking helps to reduce expenses, according to the Chamber of Commerce of Navarra, it can mean savings of up to 1,200 euros per employee and year. And also this work system increases our productivity by up to 20 percent.
- Analyze and review all expenses and compare them with previous periods and see if they experience significant variations, both upwards and downwards.
As we can see, the main and key point is the control of our company’s expenses, since these expenses are the ones that take up a large part of the budget. If we do not emphasize this, the income statements can deteriorate a lot.
In short, we can say that knowing how to optimize and have control of expenses is a strategic point for any good businessman, although it cannot be said that there is a miraculous method for it and only a series of tips such as those mentioned in this article can be given.