Cost Control Strategies for Your Small Business

By Anne Shaw
The Hartford Small Biz Ahead | Originally published: September 21, 2022
Updated: January 22, 2024

Controlling costs is essential to running a profitable business. If you don’t keep track of your operating expenses, it can become nearly impossible to catch issues that reduce your business’s profitability. You may even risk allowing operating costs to spiral out of control and land your books in the red. That’s where cost control comes in.

What Is Cost Control?

The business cost control method is about profitability. Using the cost control process, business owners can identify and manage their business costs with the ultimate purpose of reducing operating expenses. They can then use this information to create a realistic budget and put processes in place to stick to that budget as much as possible.

While this takes time and effort, it allows you to reduce your expenses and gain a deeper understanding of your finances. You’ll ultimately make better informed decisions that improve profitability.

Some small business owners may think that because they have someone handling their accounting, they don’t need to think about how to control cost. But that’s not necessarily true. While accounting is essential to your business, think of it as surface-level financial tracking. Cost control goes beyond balancing books, reconciling accounts and ensuring bills are paid.

Cost control example: Let’s say you analyze costs and realize that inventory storage has been steadily growing more expensive. You can do some research to set a budget for how much you’ll ideally spend on storage. Then, look for ways to get that cost in line with your expectations. Perhaps you shop around for other storage options and find a lower price; maybe you ask suppliers if they can store some of your inventory. Or you could change your purchasing and inventory strategy to be more aligned with demand.

Why Is Cost Control Important?

When you effectively use cost control methods, your business will benefit by:

• Keeping project costs under control. By creating a budget, you gain clarity on project timelines and find opportunities for cutting costs. Say goodbye to rogue spending.
• Reducing operational costs. This helps you ensure that a project’s expenses don’t exceed its revenue. You’re able to generate, maintain and even increase profits.
• Achieving transparency among employees, managers and leaders. Clear cost control guidelines can eliminate confusion, which can also unlock your employees’ productivity and creativity.

In order to reap the benefits of cost control, you’ll want to start tracking cost variance. Ongoing variance analysis shows the difference between what you budgeted and what you actually spent. By monitoring cost variance, you can flag and prioritize areas that need more effort to keep costs under control…[MORE]

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To read the entire article by Anne Shaw at The Hartford Small Biz Ahead website, visit: Cost Control Strategies for Your Small Business