Many business executives feel that today’s economic
environment is not conducive to increasing business profits. Of course that
would be the organizations not doing so well, but there are in fact many
organizations that indeed are making good profits today. Those that are making
good profits are probably using a strategic cost management System.
To better understand how you can increase your profits an
organization’s executives need to understand only one thing, “Costs are the
most controllable part of the profit equation.” This of course sounds too
simple but it is often overlooked. To take it a step further you have to dig a
little deeper to truly understand what your ‘direct and indirect costs’ are so
you can control them and increase your business profits.
Slash and Burn Equals Profits
Slash and burn might have been the way to maintain profits
in the old days, but today’s economics and accounting have matured and offer
much more effective ways to maintain your organizations economic profitability.
Cost management used to be about locating where an organization’s most
expensive costs were and trimming that function back. In fact it was the ‘old
ways’ that helped bring about the economic shortfall we have seen in recent
years. The smart way to increase business profits and manage costs is with
Strategic Cost Management.
Strategic Cost Management Equals Profits
What in the world is Strategic Cost Management? It’s the
process of integrating and aligning cost management within the organization’s
strategic plan in order to ensure that cost management is part of a company’s
operating procedures. A strategic cost management plan should be developed so
that it will mirror the company’s life cycle as defined by the company’s
services/products, markets, human resources and technologies. It’s a cost
management plan that ensures your organization can maintain and sustain its
economic profitability in any kind of market or economy.
