Keep your business in the black with strict cost control
Sound financial management is the foundation of a business’s profitability. However, some growing businesses struggle to keep a firm grip on cost control because their accounting systems fail to scale up with the business. CB Insights surveyed 101 failed startups and found that 29% of them had failed because of poor cash flow. Effective cost control plays a decisive role in the sustainability of a business and should be every project manager and business manager’s key priority. Let’s look at what cost control entails and how to ensure your business is carrying it out effectively.
The depth and breadth of cost control
Cost control is a broad definition for management and accounting techniques that are used to improve the liquidity, cost-efficiency and profitability of a business. Cost control strategies can apply to the entire business or specific departments, projects and operations. Here are just a handful of cost control practices that businesses can adopt temporarily or indefinitely:
- Restructuring. Sometimes a business has to go through a complete overhaul to control its costs. This could result in retrenchments and divestment in specific business activities.
- Outsourcing vs insourcing. Some operations can cost a business more over time if they’re executed in-house instead of being outsourced.<
- Tracking resources spent on a client makes billing more accurate, especially in project management and in the legal sector.
- Automation and digitisation. Advances in technology have made previously labour-intensive operations easier and faster to implement, with significant cost benefits.
- Productivity. By optimising the overall productivity of the business, you keep your operational costs flat while generating more revenue.
How to stay in check
Cost control isn’t complicated when handled proactively. The reason so many businesses fail at it is because they don’t practise cost control consistently. The longer a business’s finances are off track, the longer it takes to regain control. However, there are classic cost control strategies that you can always have in place to boost your financial fitness.
It’s useful to get into the habit of renegotiating the terms of your contracts. Service providers won’t be forthcoming with add-ons and amendments to your existing contract, you have to be proactive and ask them. The best way to get the most out of all your arrangements with your suppliers and service providers is to ensure there’s always room for you to adjust your contracts if the needs of your business change.
Strike a balance between insourcing and outsourcing
Outsourcing is not a catch-all solution for fast-tracking your operations and insourcing doesn’t always save your business money. Both have their advantages and drawbacks and are largely contextual. Remember that while outsourcing work can improve quality and turnaround times through specialised labour, it hikes up your ongoing costs. And while insourcing saves you money now, it doesn’t guarantee faster and better quality output – which can cost a company more in the long run.
Track time and resources spent
Legal offices go to great pains to ensure that every hour and resource spent servicing a client is on the record. This is a cost control technique that allows them to keep their invoicing fair for both parties. Not only does the firm gain visibility of how much of its resources are used profitably or wasted, they also get a bird’s-eye view of the general productivity and document management of the business.
Choose Equitrac for an optimised business
Equitrac is a cutting-edge cost control and recovery software suite that tracks client services and activities to ensure accurate billing, streamlined productivity and tightened IT expenditure. Whether you’re a law or an architectural firm, ad agency or construction business, Equitrac Professional, Equitrac Office and Equitrac Express have everything you need to keep a close eye on your business’s financial health at all times.