The role of a cost accountant is to create a futuristic business strategy. During business expansion, it is essential to measure capital expenditure and expenses for the new product line. Cost-saving methods for a business are inventory management, budgetary controls and standard costing analysis. Among these three checkpoints, inventory management is from the available figures. The budgeting predictions and standard costing have the process of comparison of actual and expected costs comparison. This blog emphasis key points on a predefined discussion about ways to reduce cost for the manufacturing sector and service sector.
Cost control strategy for the manufacturing sector
The manufacturing sector makes use of inventory management and Budgeting. The first place in reducing the manufacturing cost is inventory management. Inventory management is about time and process where the final product brings profit to the companies. The storage option, distribution option and the stock demand are the three things that have to be wisely managed by the cost accountant. The cost accountant analyses the multiple dealings for the storage system, distribution system and stock purchases. The research report from LERC states that waste management is essential for controlling cost in the manufacturing process. Clients do not pay for the waste during the production, but they pay only for the finished good. So, reducing the waste will result in timely production and increased profitability. Waste is a term that is not only confined to the material but is attributed to other areas such as transportation, time, over-production and over-processing. So, Cost accountants analyse these areas and advice the corporates regarding the cost-cutting ideas which is beneficial to their product line.
Administrative expenses are the fixed costs that can be controlled through outsourcing of work or invest in training the available human resources. By having an efficient workforce one can avoid errors and re-work which results in timely completion of the tasks. Compliance management is another area where the cost accountant can control the expenses. There are legal compliances to produce and market manufacturing products. So, meeting these compliances on time reduces pressure and enhances the quality of the brand. Generally, the cost accountant suggests better technology to eliminate risks. Cost accountant works with the legal aspects and technological aspects that reduce the administrative cost.
Cost control strategy for the service sector
The service industry makes use of the standard costs. It is the comparison of actual cost and expected cost. Using the analysis of standard costing, they find out the profitable product, cost of the product, and comparison of profit from different products. Activity-based costing is the ABC system which helps with pricing decisions and schemes to enhance profitability. ABC costing help to plan the cost-saving tips in Banks, Insurance Companies, healthcare industries, and financial services.
The concepts behind quality management and business process management work directly towards the operations of the organization. The focused workforce and the relationship between the work with final product or services improves the management system. The management information system consists of data that educate the cost accountant about the best cost control strategies and management policies. The expenses are tracked to check whether it exceeds the budget plan or at the right direction. If there is a mismatch with the budgeted expenses, the demand of the market, and pre-planned profits, then there is a need for a cost accountant to bring change. Cost accountants change the numbers with good plans. Cost-effective operations end with better results in Companies. Cost accountants are as tied foot and had during the Cost-based analysis and activity-based analysis as the results are base for planning. So, Cost accountant plays a vital role in the Companies during decision making, policymaking and planning.