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Business cost management: 5 common mistakes to avoid

Business cost management: 5 common mistakes to avoid

Achieving efficiency in cost management is fundamental to improving financial results and remaining competitive within the market. This is why the inherent aspects of this area require careful planning and you should avoid some mistakes that can hurt your business’s success.

Below we’ll talk more about these problems, what their consequences are, and how they can be avoided. Take a look!

1. Not registering operations

Operations need to be registered to maintain control of a company. When this isn’t done – or done in a negligent manner – it’s practically impossible to identify how much money will be coming in, how much the company has spent on bills, and how many sales have been made during a certain period, among other things.

This being so, it’s absolutely essential that everything that is done be registered, even the addition and subtraction of small values, which many seem insignificant, but these can add up, leading to a large hole in your accounts.

2. Not keeping track of your cash flow

Cash flow is the control used to register all capital movements for your company. By analyzing it, you can make strategic decisions in terms of working capital, stocks, and your balance between accounts receivable and accounts payable, for example.

Ideally you should review it daily, watching out for inconsistencies or items that haven’t been registered. Doing this frequently facilitates the identification of errors and more efficient remedial action can be taken when they are discovered quickly rather than a month later.

3. Not knowing your costs

When you don’t exactly what the total costs of your operations are – including product and stock costs, general expenses and labor costs, for example, you can’t control your company’s costs, let alone find ways to reduce their impact, which mainly affects your organization’s profitability.

Besides this, you need this knowledge to determine proper pricing, which will offer fair prices to your customers, but will at the same time be enough to cover your costs and generate a satisfactory profit.

4. Not pricing your products properly

Pricing your products properly is crucial when we’re talking about the survival and growth of companies. However, this strategy has to be very well planned, taking into consideration your business’s costs and expenses and what customers perceive as value – which will define whether they are disposed to pay for what you’re offering.

Establishing a very high price without justification will make your sales fall, while reducing your prices without reason (like a reduction in costs, for example) will seriously harm your financial results.

5. Using manual controls to manage your costs

With so many controls and monitoring required, and with a large volume of information generated every day, performing these tasks manually will subject this process to more errors and rework and will also make your data less reliable.

In this sense, investing in management software is essential. In addition to automating these activities, it helps in the analysis and decision-making processes by making information more reliable. It increases your business’s agility and productivity and reduces its costs.

In today’s article, we’ve cited just a few management mistakes that should be avoided. Ideally managers should constantly reevaluate their activities, looking for errors or bottlenecks which affect results, and find solutions to minimize or even eliminate these problems.