Business and Cost Management
Cost is the valuation on the expense of resources, time, money to acquire something by a business. For businesses, the planning and controlling of the budget is an important tool to remain effective and productive in the market. The cost management process improves cost efficiency for businesses through reduction or restriction on cost growth. In the context of a country like Nepal with a high number of small and medium enterprises, cost management plays an important role in business.
Cost Management Strategy
Cost management determines the final cost of services or products. The low pricing strategy raises questions on the quality of service. On the other hand, it can have impacts to sustain a business. The high pricing of products and services is a huge problem for businesses. This is most commonly due to a lack of cost management efficiency for small and medium businesses in countries like Nepal. High pricing results in a lesser tendency of customers to consume business products. Hence, it is an important factor to have a balance of pricing through a cost management policy. Getting the right balance on product or services pricing provides a competitive advantage in today’s market over competitors.
Effective project cost management policy for business paves way for the success and completion of the project. Before the start of any project, the cost management policy helps describe any possible cost overruns. It is common to have unexpected costs associated with any project. Cost management provides an opportunity to deal with these issues and prepares businesses for the worst-case scenarios as far as possible. Understanding the nature of factors and techniques that can affect cost management is important.
Factors affecting cost management in business
The importance of technology in today’s business does not require any definition. It is a well-known fact how technology helps in production, marketing, sales, and continual improvement of the business. Likewise, technology also helps businesses to manage costs through innovation, delivering standards through quality review, lesser production time, and increment in productivity.
A complex manufacturing process increases the cost of business. This increases the cost of the final product. The manufacturing and distribution of products should be in ordinance with the market demand. This is known during a research phase if the cost management can bring the final price within the market competition.
For all business owners, time is money. Therefore, entrepreneurs are looking to decrease the cost of time wherever applicable. When the plans do not meet, the cost of time and money both increase. That is why employers try to push their employees to complete the job quickly. This saves time and cost and provides more time for the review of the job, which increases the quality of work.
Inventory and Asset Management
A business holds assets for its operational activities. The maintenance of assets and reduction of inventory not in use but still not shortcoming for business operational activities. The effective way of Inventory stockings and assets management decreases the chance of unwanted vendor costs. In the context of Nepal, it is difficult for small and medium enterprises to hold stocks and unwanted assets.
On some occasions, it is cost-effective to outsource jobs rather than trying to complete the job in-house. There are occasions when employees do not have enough skills for temporary jobs or some jobs that appear as a one-off job. It is cost-effective to outsource those jobs than to hire a new skilled professional for the job. In the context of Nepal, it opens the door for a parallel work environment and increment in productivity.
Sense of Volatile Market
The business market is always volatile and needs exploring. The quicker one gets hold of a market sense for new opportunities, it provides new opportunities for cost reduction. Therefore, getting updated with market sense provides good value in cost management. This is especially beneficial in the negotiation of contracts with vendors in terms of contracts and prices.
Advantages of Cost Management for Business in Nepal
In addition, cost management can have other advantages as portrayed below.
- Project-specific costs are well accounted for beforehand, and efforts are made for its reduction.
- Cost management provides quick references in the future to associated costs on types of projects.
- Another advantage is that cost management facilitates the estimation of expected revenues at the end of the project, which aids in the analytics of project management and profit and loss.
- It effectively assists to keep resources managed and business operations well-structured to obtain business goals.
- This keeps business goals updated concerning recent trends of the business.
- Additionally, organizations get clear insights on regular expenses and areas of cost improvement for their business.
- Cost Management is an important factor in considering merge and acquisitions of businesses. It helps organizations to determine their positioning of the business.
- It makes a business financially stable and secure. Additionally, facilitates financial projections and forecasting.
- Also, it provides budget vision and assists to set targets that can keep a business out of debts and failure.
To conclude, within similar environments or the same market, a business’s challenges and risks are the same. But a cost management strategy differs. Whether it may be an operational strategy or human resource management strategy or product strategy, it directly links with a cost management strategy. An efficient and effective cost management policy can stand out from a business from its competitors. In a country like Nepal, where the competition for sustainable business is high, cost management is a core factor to drive a business to success.