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 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.
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.
A strategic cost management plan is an in-depth solution that brings transparency to your costs for efficient business processes, departments, products and IT services. It also brings cost management out of the accounting department and upfront to the executive level. Once a strategic cost management Plan is in place organization executives and managers can make timely and effective cost management decisions based on facts and data instead of just looking at an enormous number on a P&L statement. A good strategic cost management system will have economic modeling built-in so that organizations will know what the outcome of a cost or spend measure will produce. A strategic cost management system can also show you who your most profitable and costly customers are and why they are profitable or costly.
With a strategic cost management plan entrenched and a culture of cost management established, corporate decisions can be made confidently and decisively. This in turn leads to ‘controlling costs’ while sustaining economic profitability. Armada Consulting utilizes it’s 20 years of experience and the latest technologies to design and develop strategic cost management systems.
To learn how Armada Consulting can help your organization increase it profits and sustain it’s economic profitability in any market with strategic cost management call Armada at (918) 856-3414 or contact us via email.
Tags: Business Processes, Business Profits, Cost Management, Cost Management System, Economic Profitability, IT Cost Management, Strategic Cost Management