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Strategic Cost Management Home Video About Us Contact
INTRODUCTION
Cost control and Cost Reduction are key
strategies used by businesses to improve
profitability and operational efficiency. Both are
aimed at managing expenditures, but they differ in
their approach and long-term impact. While cost
control focuses on managing costs within the
existing budget and operational framework, cost
reduction aims at permanently lowering the cost
base.
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COST CONTROL
Cost control refers to the process of
managing, monitoring, and regulating
costs to ensure that they remain within
the budgeted limits. It is a short-term
strategy designed to track expenses and
prevent overspending.
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Ensure Budget Adherence: Cost control helps businesses
stay within the budget and avoid overspending.
Improve Operational Efficiency: By monitoring costs, businesses
OBJECTIVES can identify inefficiencies and take corrective actions.
Prevent Unnecessary Expenses: It involves monitoring all aspects of
business operations to prevent wastage and unnecessary costs.
Improve Profit Margins: By keeping costs within budget, profit
margins can be improved, even if revenue remains stable.
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TECHNIQUES OF COST CONTROL
Budgeting: The creation of a detailed budget helps in planning, monitoring, and
controlling expenses.
Variance Analysis: This involves comparing actual costs with budgeted costs to
identify discrepancies and take corrective actions.
Cost Allocation: Proper allocation of costs to specific departments or activities
helps in understanding and managing costs better.
Cost Tracking Systems: Implementing software tools and accounting systems to
track costs in real time.
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BENEFITS OF COST CONTROL
Enhanced financial visibility.
Prevention of cost overruns.
Better decision-making.
Enables businesses to allocate
resources efficiently.
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COST REDUCTION
Cost reduction refers to the strategy of
permanently lowering the overall cost
base of a company without affecting its
quality or operational capacity. Unlike
cost control, which focuses on managing
and containing costs, cost reduction aims
to decrease the underlying costs through
various initiatives.
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OBJECTIVES
IMPROVE PROFABILITY INCREASE COMPETITIVE
RESOURCE OPTIMIZATION SUSTAINABILITY
ADVANTAGE
Reducing costs Companies that Cost reduction helps Long-term cost
directly contributes reduce costs while to utilize resources reduction strategies
to higher maintaining quality more effectively, help ensure the
profitability. can offer lower leading to improved continued success
prices, making them productivity. of the business.
more competitive.
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METHODS OF COST
REDUCTION
Process Improvement: Streamlining and automating processes
can help to reduce operational costs. Lean management
principles, such as Six Sigma, focus on eliminating waste and
inefficiency.
Outsourcing and Offshoring: Shifting non-core functions (like IT
or customer service) to third-party vendors or overseas can
reduce labor costs.
Negotiating with Suppliers: Renegotiating supplier contracts or
finding alternative suppliers can lead to lower procurement costs.
Energy Efficiency: Implementing energy-saving technologies or
adopting more efficient practices can result in significant long-
term savings.
Staff Optimization: Reassessing staffing levels, eliminating
redundant positions, or cross-training employees can help cut
down on labor costs.
Technology Integration: Implementing new technologies or
software that improves efficiency, reduces manual work, and
speeds up processes can lead to substantial cost savings.
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Strategic Cost Management Home Video About Us Contact
BENEFITS OF COST REDUCTION
Long-Term savings.
Enhance Competitiveness.
Improved Profit Margins.
Better Resource Allocation.
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Differences Between
Cost Control and Cost Reduction
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MEMBERS:
JAGURAP, KENTH R.
GROUP 2 CACANOG, WENDY CHRIS D.
YGOÑA, JOELINA