Cost Control

1. Your Costs

Cost control works best as part of your routine financial management. The first step is to look at your existing costs.

1.1 Identify your major cost centres. Typically these might be purchasing, production, sales and marketing, financing, administration, premises, facilities management, and research and development (R&D).

• In a small business, a cost centre is usually the area one manager is responsible for (see 3.1).

1.2 Identify the major types of cost within each cost centre.

These might include staff costs, raw materials and supplies, utility bills for energy and water, capital expenditure, other purchases (eg consultancy services and advertising space), premises, communication, travel, transport and financing costs.

1.3 Choose the costs to focus on first.

• Costs that may offer easy savings (see 5).
• Large costs that you may be able to change in the short term.Fixed costs (eg long-term fixed rate loans or fixed price contracts for raw materials) are hard to control in the short term.