In the context of increasingly fierce competition, controlling and optimizing management costs not only helps businesses maintain financial stability but is also the key to sustainable development. So what are business management costs and what factors do they include? Let's find out with Bizzi through the article below!
1. What is business management cost (CPQLDN)?
Business management costs are the sum of expenses spent on operating and supervising business production activities. This includes payments to the management team (such as salaries, bonuses, allowances, insurance, training, etc.), office rental and maintenance costs, investment in office equipment, marketing costs, taxes and other legal expenses.
Characteristics of business management costs:
- General business expenses: CPQLDN does not belong to any specific business unit or function, but serves the entire enterprise.
- Fixed costs: A portion of CPQLDN is considered fixed, because it arises regardless of the level of production or sales during a given period.
- Indirect costs: CPQLDN are indirect costs that cannot be directly assigned to a specific product, service or department.
- Costs required to maintain operations: These are the costs required to maintain the overall operations of a business, from the top to the bottom.
2. Types of business management costs
Basically, business management costs include the following types:
- Employee management costs: Including salary, allowances, health insurance and social insurance, to ensure benefits and stabilize human resources for the enterprise. These amounts are calculated based on labor contracts and internal welfare policies.
- Management material costs: Including stationery, tools, work support equipment and fixed asset repair materials, ensuring smooth office operations and asset maintenance.
- Office supplies costs: This cost is related to the purchase of necessary office supplies and equipment, which help optimize daily work and create a professional working environment.
- Fixed asset depreciation costs: Reflects the depreciation of shared machinery, equipment, and factories over time, helping businesses accurately value assets and usage costs.
- Taxes and fees: Including business license tax, land rent and other fees as prescribed by law, contributing to ensuring that enterprises comply with financial obligations to the State.
- Contingency costs: Provisions for doubtful debts and payables are made to minimize financial risks, ensuring that businesses always have reserves available for unexpected situations.
- Outsourcing service costs: Costs of outsourcing services, purchasing technical documents, patents, renting fixed assets, paying subcontractors to supplement capacity and provide professional support in management activities.
- Other cash expenses: Includes conference costs, travel, transportation and other support expenses to serve management, facilitate communication and perform work tasks effectively.
3. Why should we determine business management costs?
For businesses to operate efficiently and transparently, managers need clarity in cost management. Managers must monitor, check and control these expenses to optimize profits.
Determining business management costs specifically brings the following benefits:
- Helps managers quickly control the organization's business activities.
- Support businesses in estimating business operations, especially in determining material standards and labor costs.
- Facilitate investment decision making, product pricing, order evaluation and business performance analysis.
- Increase savings in management and use of organizational resources.
- Promote employee accountability in using resources efficiently and adhering to standard cost norms.
4. Method of accounting for business management costs
The method of accounting for business management costs is carried out according to accounting principles, specifically as follows:
Debtor:
- Record actual business management costs incurred during the period.
- Record the provision for doubtful debts and provisions for payables if the provision required in this period is greater than the provision established in the previous period but not fully used.
The party with:
- Record reductions in business administration expenses.
- Reversal of provision for doubtful debts and provisions for payables if the amount of provision required in this period is less than the amount of provision established in the previous period but not fully used.
Account 642:
- There is no ending balance, meaning that after the transfer, the balance of this account will be 0.
Level 2 account of account 642:
- Tài khoản 6421 – Chi phí bán hàng: Reflects actual costs incurred in the process of selling products, goods and providing services during the period of the enterprise.
- Tài khoản 6422 – Chi phí quản lý doanh nghiệp: Reflects the general management costs of the business incurred during the period.
Accounting for business management costs must comply with current regulations and guiding circulars, ensuring accuracy and transparency in the business's financial statements.
- Outsourcing costs: technical documentation, patents, fixed asset rentals, subcontractor costs.
- Other cash expenses: conference expenses, travel, staff expenses.
- Provision for doubtful debts, provision for payables (if the provision to be established this period is greater than the provision established in the previous period that has not been fully used).
The side has of Account 642 recorded:
- Business management expense reductions.
- Reversal of provision for doubtful debts and provisions for payables (if the provision amount to be established this period is less than the provision amount established in the previous period that has not been fully used).
Accurate and transparent accounting of business management costs helps businesses effectively control business activities, estimate costs, make reasonable investment decisions, save resources and enhance employee responsibility in using resources.
5. Impact of management costs on product and service prices
Business management costs play an important role in determining the cost of products and services. These expenses can directly or indirectly affect prices and affect business performance.
Direct impact
Expenses such as office rent, management staff salaries and marketing costs are often directly included in the cost of products/services. These are mandatory costs to maintain business operations, ensure stable operations and maintain market presence.
Indirect effects
In addition to direct costs, businesses also incur expenses such as research and development (R&D), customer support, and administrative costs. Although they are not directly included in the cost of the product, they impact the total operating costs and profits of the business. As total costs increase, businesses may need to adjust their selling prices to maintain profits.
Impact on business performance
Reasonable management costs help businesses optimize resources, reduce unnecessary costs and improve business efficiency. A business that controls management costs well will have a competitive advantage in price, helping to attract customers and expand market share. On the contrary, if management costs are too high, product/service prices may be pushed up, reducing competitiveness in the market.
6. How to optimize business management costs effectively
To optimize business management costs effectively, businesses can apply the following strategies:
6.1 Optimizing management activities
- Process control: Build and maintain clear, efficient work processes that minimize waste and increase productivity.
- Eliminate unimportant work: Evaluate and eliminate unnecessary activities to focus resources on higher value tasks.
- Building a quality management system: Applying quality management standards helps ensure high quality products and services, minimizing errors and related costs.
6.2 Using modern technology
- Data management software, human resources, finance, ERP: Apply technological solutions to help automate processes, minimize errors and increase management efficiency.
- Bizzi Expense: This is a modern expense management solution that helps to check invoices, automate expense approval processes, and manage expenses by department/project and budget.
6.3 Choosing the best supplier
- Consider the goal: Ensure that suppliers understand and meet the business objectives of the enterprise.
- Evaluate service, quality, cost: Conduct a comprehensive assessment of service quality, products and costs to select the most suitable supplier
6.4 Other solutions
- Increase revenue, reduce costs: Focus on increasing revenue through market expansion, improving products/services and at the same time reducing costs by optimizing processes and resources.
- Determine management cost norms: Establish specific cost norms to help control and evaluate the efficiency of resource use.
- Consider spending wisely or saving.: Encourage the rational use of resources, avoid waste and promote a culture of saving in the enterprise.
Applying the above strategies not only helps businesses control costs effectively but also enhances competitiveness and ensures sustainable development in a challenging business environment.
Optimizing business management costs not only helps to minimize waste but also improves operational efficiency and increases competitiveness in the market. By controlling processes, applying modern technology, choosing the right suppliers and applying reasonable financial solutions, businesses can optimize resources and increase profits.
If your business is looking for a solution to increase efficiency in the business expense management process, Bizzi Expense is the top choice. With Bizzi Expense, managers can manage expenses effectively with real-time tracking, automated expense approval, flexible integration, and smart reporting.
Businesses can sign up for a trial of Bizzi Expense at:https://bizzi.vn/dang-ky-dung-thu/
Building a strong cost management strategy not only brings short-term benefits but also ensures sustainable development in the long term. Be proactive in evaluating, improving and innovating to make your business operate more efficiently and sustainably in a challenging business environment.
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