1000 Business Lessons Every Businessman Must Know

Chapter 35 Cost Control: Open Sources, Reduce Expenditures, Prevent Waste (1)
[-]. The basis of cost control
The starting point of cost control, or the platform of the cost control process, is the basic work of cost control.If cost control does not start from the basic work, the effect and possibility of success of cost control will be greatly affected.

276. Establish consumption quotas

Quota refers to the quantity limit reached by the consumption of various resources such as manpower, material resources, and financial resources under a certain production technology level and organizational conditions. It mainly includes material quotas and working hours quotas.Cost control is mainly to formulate consumption quotas, and only by formulating consumption quotas can it play a role in cost control.

The formulation of working hour quotas is mainly based on factors such as the income level of each region, the wage strategy of the enterprise, and the status of human resources.In modern enterprise management, labor costs are increasing, and working hour quotas are particularly important.

In work practice, according to the characteristics of the production and operation of the enterprise and the needs of cost control, there will also be power quotas, expense quotas, etc.

Quota management is the core of the basic work of cost control. Establishing a quota picking system, controlling material costs, fuel and power costs, establishing a labor contract system, controlling man-hour costs, and controlling manufacturing costs all rely on the quota system. There is no good quota. production costs cannot be controlled; at the same time, quotas are also the main basis for cost forecasting, decision-making, accounting, analysis, and distribution, and are the top priority of cost control.

277. Standardized work

Standardization work is the basic requirement of modern enterprise management. It is the basic guarantee for the normal operation of the enterprise. It promotes the rationalization, standardization and high efficiency of the production and operation activities and various management tasks of the enterprise. It is the basic premise of successful cost control.In the process of cost control, the following three standardization tasks are extremely important.

1. Measurement standardization

Measurement refers to the use of scientific methods and means to measure the quantitative and qualitative values ​​in production and operation activities, so as to provide accurate data for production and operation, especially cost control.If there is no unified measurement standard and the basic data is inaccurate, it will be impossible to obtain accurate cost information, let alone control it.

2. Price standard
In the process of cost control, two standard prices should be established, one is the internal price, that is, the internal settlement price, which is the value scale for the exchange of "commodities" in the simulated market between various accounting units within the enterprise, and between each accounting unit and the enterprise; It is the external price, that is, the settlement price of supply and sales with external enterprises in the purchase and sale activities of the enterprise.Standard price is the basic guarantee for cost control operation.

3. Quality Standards
Quality is the soul of a product, without quality, no matter how low the cost is, it is futile.Cost control is cost control under quality control. Without quality standards, cost control will lose its direction, and there is no cost control.

4. Data Standardization

Formulate the collection process of cost data, clarify the responsibilities of cost data submitters and bookkeepers, ensure that cost data is submitted on time, recorded in time, data is easy to transmit, and information sharing is realized; cost accounting methods are standardized, and cost calculation methods are clarified; The cost written documents implement the national official document format, unify the header, form a unified cost calculation chart format, and ensure that the cost accounting results are accurate.

278. Do a good job in system construction
In a market economy, the basic guarantee for the operation of an enterprise is the system, and the culture. The system construction is the foundation, and the culture construction is the supplement.

Without system construction, the operation of cost control cannot be consolidated, and the quality of cost control cannot be guaranteed.The most important systems in cost control are the quota management system, the budget management system, and the expense reporting system.

In practice, there are two problems with institution building.

One is that the system is not perfect. In terms of the content of the system, the construction of the system is more from the perspective of norms, which looks like an order.The correct approach should be that system construction should start from operation, so that the responsible person can find the right position and facilitate operation.

The second is that the implementation of the system is not effective. It always emphasizes the objective reasons such as poor management foundation and personnel restrictions. Once there is an interest adjustment content, it shrinks, causing the system to be useless.

279. Conduct cost estimates
In the process of enterprise decision-making, in order to make the best use of time, cost and resources within the scope of work, people have developed many cost estimation methods to try to get a better estimate.

1. Empirical estimation method

The person using this method should have extensive experience and come up with an approximate figure accordingly.Using the cost of similar projects to make an approximate guess on the cost of the current project, it is acceptable for projects that require a quick figure, but obviously cannot meet the requirements for detailed estimates.This method is mainly applicable to opportunity research and can be used as a reference for proposing project tasks and considering investment.

2. Factor estimation method

It uses mathematical knowledge to predict the future based on the past.Its basic approach is to use scale and cost maps.Once the size of the project is known, the curves can be used to find approximate figures for the various components of the cost.

3. Top-down estimation method

This approach requires first gathering some managerial experience, as well as historical data on similar past activities.Managers estimate the cost of the project as a whole and the costs of the subprojects that make up the project. These estimates are given to lower-level managers on the basis of which they estimate the costs of the tasks and subtasks that make up the project and subprojects.Then continue to pass their estimates to the next layer, until the bottom layer.

4. Bottom-up budgeting

The person using this method carefully scrutinizes the time and budget of the task to determine it as precisely as possible.Initially, estimates are made for resources, such as labor hours and raw materials, which are then converted to required expenses.Among them, standard analysis tools can be used to improve the estimation, such as learning curve and so on.Differences in opinion are resolved through consultations between upper and lower management.If necessary, the project manager can participate in the discussion to ensure the accuracy of the estimate.The resulting task budgets are combined to form a direct estimate of the overall project cost.On top of this, the project manager adds appropriate overhead costs such as overhead, contingency, and profit targets to be met in the final project budget.

[-]. Control various costs and expenditures
280. Control material purchase cost
The control of material cost should start from two aspects: one is the control of material consumption, the other is the control of material price, and the control of material consumption is the main one.

To control the consumption of materials, first of all, the standard consumption should be used as the basis, and the quota system should be strictly implemented.All departments can only use in installments and in batches within the prescribed limit. When materials need to be used beyond the limit, the reason must be found out first, and after certain approval procedures, compensation should be made with the excess material requisition list; Quantity control, that is, to re-measure the original quotas to reduce the consumption of various quotas, so as to achieve the purpose of controlling the total expenditure.

The control of material prices is mainly to control the purchase price of materials. Although the change of purchase price is mainly caused by external factors, the following points can also be achieved from the perspective of internal control:
(1) When signing the supply contract, try to strive for the lowest price under the premise of ensuring the specifications and quality requirements;

(2) The financial department should require the supply department to purchase materials strictly according to the prescribed price, and should not purchase scarce materials or other materials urgently needed for production at high prices;

(3) If the supplier raises the price arbitrarily, the accounting department should refuse to pay the raised part of the payment.

For materials with a large price increase, single-item control is implemented, that is, to determine the main materials, implement follow-up assessments, and determine that the consumption reduction of one main material every month will be used as a breakthrough to completely eliminate waste.Improve the self-made processing capacity of materials, make full use of the existing self-made production capacity of the workshop, and further improve the self-made processing capacity of materials, so that those that can be processed by themselves will not go out for processing, and those that can be produced by themselves will not be purchased.

281. Control the cost of salary expenses
The control of wages is mainly carried out from the aspects of effective use of working hours, improvement of labor productivity and supervision of the rational use of wage funds.

In daily production, production tasks should be allocated according to working hours or output standards, timely and correctly reflect the standard working hours and actual working hours of actual output, as well as the differences in working hours and the reasons for the differences, and feed back these differences to the responsible person or responsible department according to the attribution of responsibility , in order to formulate new measures based on the specific situation, quickly prevent the expansion of unfavorable differences, and consolidate and develop favorable differences.

Enterprises must formulate wage fund plans in accordance with wage policies, number of employees and monthly wage standards, as well as regular funds, various allowances and wage standards for non-working hours.In order to control the salary fund plan, the department should also issue salary fund indicators to control the expenditure of the salary fund and conduct regular assessments.This requires the financial department to cooperate with the labor department to supervise all departments to strictly abide by the establishment quota, pay bonuses and wages according to relevant regulations, and not to distribute bonuses indiscriminately, arbitrarily expand the scope of allowance enjoyment, increase items and raise standards; strictly implement relevant wage and treatment regulations, To prevent frequent occurrences; overtime wages must be strictly controlled, and overtime wages must be approved by the leader in advance.

282. Control manufacturing overhead expenditure

The control of manufacturing costs should start from the effective use of production capacity, improvement of work efficiency and reduction of consumption levels.

For daily control of manufacturing costs, cost indicators must be prepared on a monthly basis to control cost expenditures.

Before the start of each month, the financial department of the enterprise shall, in conjunction with the centralized management departments of relevant expenses, determine and issue control indicators for various expenses to the company according to the quarterly expense budget and combined with the specific conditions of each month.Each department should control the expenses within the determined index range, among which the fixed expenses should control the absolute amount of expenses according to the project; if they belong to variable expenses, they should also control the expenses in combination with the working hours, number of workers, equipment quantity and output.The financial department and the responsible unit should supervise and inspect the expenses according to the assigned targets, so as to promote the completion of the cost targets.

(End of this chapter)