Reducing costs in a company

Cost reduction in an enterprise is one of the most effective methods of improving a company’s financial situation. Carrying out cost optimization is necessary especially when the company is either incurring wastes or making small profits.

Cost management

Cost management is a set of activities aimed at reducing expenses in an enterprise. Also, cost management is about planning and controlling the costs of an enterprise’s operations. Cost managers perform an analysis to assess the risk of waste in a company, as well as how and how often money is spent. A well-executed analysis identifies wastes and singles out areas where there is potential for savings. The next step is to appoint a team to carry out the optimization project. It is extremely important to select the members of the team so that they represent different positions in the company – because optimization activities must not reduce quality and must not generate additional wastes in other areas of the company.

The most common reasons for reducing costs in a company

The most common reasons for cost optimization include:

• The company’s profitability being too low compared to the competition.
• The need to reduce prices of final products.
• Increase in the cost of semi-finished products, raw materials and supplies.
• Increase in operating costs (electricity, water, gas, etc.).

Methods of reducing costs in a company

There are many methods of reducing costs in an organization. However, there are a few methods that are the most popular. These are the methods that we will look at in this article.

It should be remembered that the chosen method of reducing costs in an enterprise should be tailored to the business profile of the company and its resources (infrastructure and human resources).

Outsourcing

That is, handing over some of the tasks being performed to an external company. An external company specializing in a particular area of activity often performs specific tasks better and cheaper. By using outsourcing services you can significantly reduce costs. Outsourcing can include, for example: sales, IT support, cleaning, accounting, marketing.

Optimization of purchasing processes

That is, setting the right purchasing strategy, market research and comparative analysis of offers from suppliers. You can learn more about optimizing the purchasing process in this article.

Motivational remuneration systems

That is, granting employees additional benefits for effective work and achievement of set goals (such as sales). Such a system is extremely effective, but it should be remembered that the individual goals set for the employee should coincide with the strategic goals of the company.

Optimization of key processes in the organization

Process optimization involves identifying wastes occurring in these processes and systematically improving them. In this case, it is worth paying attention to the competitive triangle, i.e. cost, time and quality. The key is to improve at least one of these parameters while not deteriorating the others.

Use of modern training solutions

Access to professional training systems for companies (e.g., Opexity for business) using modern technological solutions and the Internet has significantly reduced the cost of employee training. More and more companies are using innovative learning systems (LMS). In addition, studies show that online training is more effective than traditional ones.

• Employees declare that they learn 5 times more material through e-learning.
• 72% of companies are becoming more competitive by using learning management systems (LMS).
• Four out of five Fortune 500 companies make extensive use of learning management systems (LMS) to stay competitive.

Source: Think Impact