Cost Management A Rather Necessity to Increase Bottom lines

Profit is a derivative of juggle between expenses & income. Typically a business has to either reduce expenses or increase sales / income in order to increase profits. While increasing sales is related to several external factors (like product / service demands, consumer income levels, market economies, availability & price of substitute products / services etc.), expenses or cost management is conducted rather internally to reduce costs.

Numerous cost management strategies can be applied on various elements within the organization that affect bottom lines. Procurement strategies, vendor management, logistics supplier management, production process automation, energy, human resources, sales & marketing management etc. are some of the key conventional elements that define the operational excellence of a business unit. Applying strategies like ‘Lean Accounting’ & ‘Six Sigma’ practices are some of the sure-shot tools of achieving operational excellence.

Lean Accounting- Originated from lean manufacturing practices, lean accounting is about implementing lean practices accounting methodologies. It seeks to transform traditional accounting methods to a system that motivates & measures outstanding business practices in a lean structured enterprise. The change presents internal management accounting information to managers in formats that allows them to clearly evaluate business processes and drive value streams. Lean accounting allows identifying and eliminating wasteful resources or processes from the organization.

Some of the key advantages of implementing Lean Accounting practices include:

1.Correct, comprehensible and on-time information throughout the organization
2.Prompt and fact-based decision making
3.More efficient accounting processes
4.Ability to identify and eliminate waste from various processes & operations from within the organization
5.Aid lean culture by motivating employees to participate in lean practices

Six Sigma- It is a mathematical and statistical model that emphasizes on reduction of operational errors to lowest levels and hence aid highest levels of operational excellence. When producing goods or services, the model allows minimizing inputs and wasted outputs, producing what the customer requires, correctly, the first time and driving continuous improvement into every process, by bringing suppliers and front-line workers into the loop.

This model highlights various inefficiencies and wasted resources through the use of statistical models applied to company’s operational methods hence allowing managers to eliminate these errors and achieve perfection to maximum permissible limits.

There is an immense significance of costs of each activity of manufacturing practice. While the major categories include manufacturing costs, management costs, marketing costs, and financial costs. Small and medium factory enterprises are applying procurement strategies, to vendor management, to logistics supplier management strategies as the most significant efficiency drivers.

Zycus a leading solutions providers offer global procurement management, procurement strategy, strategic sourcing to more than 150 leading Fortune 1000 customers that consider spend management software, processes and technology strategic to their competitive advantage.

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