Business cost management is one of the most important factors that help businesses maintain stability and develop in a fiercely competitive environment. Effective cost control not only helps maximize profits but also minimizes financial risks and achieves sustainable growth. However, many businesses still have difficulty implementing appropriate cost management strategies, especially when lacking support tools.
In this article, Bizzi will provide you with a detailed guide on how to manage business expenses, from analyzing expenses to applying modern technology and software. Let's explore how successful businesses manage expenses intelligently and effectively.
1. What is business cost management? Definition and important role
1.1 Definition
Business cost management is the process of planning, organizing, directing and controlling cost-related activities in an enterprise. The goal of cost management is to minimize costs, maximize profits and ensure efficient use of resources.
1.2 Important role
Effective cost management helps businesses:
- Optimize profits and protect financial health
- Control and minimize unnecessary costs
- Increase profitability and maintain financial stability.
2. Distinguish between expense and expenditure in business cost management
In cost management, it is necessary to distinguish between “expense” and “expenditure”:
- Expense: These are expenses that are recorded directly into type 6 accounts according to the Vietnamese accounting system. These are expenses recorded in the accounting period and directly affect the business's profits.
- Expenditure: Expenditures, which can be expenses of an individual in an organization and can be an individual expense. Expenditures may not be recorded as expenses in the period immediately but are recorded as assets or prepaid expenses.
Understanding this difference helps businesses manage their finances more accurately and effectively.
3. Common types of business costs and how to classify them in management
In business cost management, classifying costs scientifically and reasonably will help businesses control cash flow, optimize production and business activities and make more effective decisions. Below are common ways to classify costs that business owners need to master.
3.1. Classification of costs according to variable nature
This is a classification that helps businesses understand the relationship between costs and production output. Including:
- Fixed Costs: These are expenses that do not change regardless of whether output increases or decreases. For example: rent, management salaries, depreciation of fixed assets.
- Variable Costs: Are expenses that increase or decrease in direct proportion to output. For example: raw material costs, direct labor costs in the production process.
Understanding fixed and variable costs will help businesses plan their finances and analyze break-even points more effectively.
3.2. Cost classification by operational function
This classification helps managers evaluate costs by functional department, thereby optimizing operating budget.
- Production cost: Includes direct material costs, direct labor costs, and general manufacturing costs such as electricity, water, and machinery depreciation.
- Selling and administrative expenses: Includes items such as marketing costs, shipping costs, administrative costs, and office staff costs.
Classification by function helps business owners allocate budgets reasonably among departments, avoiding wasting resources.
3.3. Classify costs according to controllability
This is an important classification in business cost management, helping managers evaluate the financial control capabilities of each department or management level.
- Controllable Costs: These are costs that can be adjusted or cut, such as meeting costs, hospitality costs, training costs.
- Uncontrollable Costs: These are costs that arise over which the manager has no control, for example, factory purchase costs decided by the head office.
Recognizing the boundary between controllable and uncontrollable costs helps managers focus efficiency improvements where intervention is possible.
4. Effective methods of controlling business costs for businesses
Cost control is not just about cutting costs, but also optimizing all resources to increase operational efficiency. Below are some cost control methods that many businesses have successfully applied.
4.1 Improve output quality – Reduce hidden costs
Costs incurred by defective products, services that do not meet customer expectations, or inefficient work processes are often not immediately apparent, but they have a major impact on profits. Improving output quality helps businesses:
- Reduce the rate of damaged and returned goods
- Optimize warranty and customer care costs
- Increase customer satisfaction and retention
4.2. Periodic review and cost analysis
Businesses need to regularly analyze expense reports by department, project, or product to identify items that are consuming unnecessary budget. Some important steps include:
- Build a clear cost management accounting system
- Set up cost KPIs for each department
- Compare planned and actual budgets periodically
Bizzi supports businesses in setting up a systematic cost management system with features such as setting up budgets for each category, department, and project; automatic warnings when spending exceeds the budget; and real-time accounting data analysis tools. In addition, Bizzi also allows setting up flexible and transparent internal spending regulations, thereby helping businesses easily monitor, control, and adjust costs according to set KPIs, ensuring budget optimization and improving operational efficiency.
4.3. Optimizing processes and resources
An effective way to manage business costs is to restructure work processes and reallocate resources. Businesses can consider:
- Use outsourcing for non-core activities
- Automate repetitive processes (like accounting, invoicing, payments)
- Train employees to improve multitasking skills, reducing dependence on one position
Bizzi supports businesses in fully automating repetitive accounting processes, from processing input invoices using OCR technology combined with AI, to digitizing the payment request and expense approval process. The system automatically checks the validity of invoices, compares information and instantly updates data into the accounting software, reducing processing time by up to 80% compared to manual processing. Not only improving efficiency, Bizzi's solution also helps businesses minimize errors, cut operating costs and optimize resources effectively.
5. Challenges and opportunities
In the process of managing business costs, business owners will have opportunities as well as challenges. Understanding these, business owners can manage their businesses more effectively.
Challenges in business cost management
Managing business expenses is a challenging task for any business owner. Some of the key challenges businesses often face include:
- Difficulty in controlling costs: Costs in a business can arise unexpectedly, especially in areas such as raw materials, labor costs and management costs. Controlling and optimizing these expenses requires a detailed tracking system and flexibility in adjustment.
- Market volatility: The market is always changing in terms of prices and consumer demand. This can directly affect production costs, especially for manufacturing and retail industries. Predicting and adjusting costs in a volatile environment is a big challenge.
- Long-term cost management: For many businesses, managing costs in the short term may be simple, but maintaining cost efficiency in the long term is a major challenge. Lack of information and management tools can make it difficult for businesses to make accurate financial plans.
Opportunities in business cost management
However, there are also many opportunities for businesses to effectively manage business costs:
- Increase operational efficiency: Cost optimization helps businesses improve operational efficiency while minimizing unnecessary expenses. This helps improve profits and reduce financial burdens.
- Applying technology to cost management: Using advanced cost management tools and software will help businesses track spending more accurately and efficiently. Technologies such as ERP (Enterprise Resource Planning) and AI (artificial intelligence) can automate cost analysis and forecasting, helping businesses make faster and more accurate decisions.
- Ability to optimize production and operations processes: Businesses can optimize production and operating processes to reduce costs. By improving processes and increasing labor productivity, production costs can be significantly reduced, creating a competitive advantage for businesses.
- Increase competitiveness and sustainable development: Effective cost management not only helps to minimize expenses but also contributes to creating a solid financial foundation for long-term development. When a business can maintain low costs but still high product or service quality, the business will be able to compete strongly and develop sustainably.
6. The importance of building awareness of saving business costs for employees
In business cost managementBuilding cost-saving awareness among employees plays a necessary role, not only helping to optimize resources but also contributing to the sustainable development of the business.
- Increase resource efficiency: Employees who are conscious of saving help reduce unnecessary spending, optimize resources and improve profits.
- Enhance responsibility and commitment: Employees are aware of the importance of cost savings, thereby having greater responsibility and long-term commitment to company goals.
- Building a positive corporate culture: A culture of cost savings will help businesses maintain financial stability and improve work efficiency.
- Increase competitiveness in the market: Cost savings help businesses maintain product quality, while having more resources to invest in growth strategies.
- Reduce waste in daily operations: Employees who are conscious of saving help reduce unnecessary costs in the work process, creating an efficient working environment.
7. Modern business cost management methods in accounting
With the development of management science and technology, businesses today have more options in applying modern business cost management methodsHere are some methods that are being used by many successful businesses:
7.1 Activity-Based Costing (ABC)
Instead of allocating costs in the traditional way, ABC helps to accurately determine the costs of each specific activity, thereby assigning the right costs to each product and service. This method helps businesses identify non-value-added activities to eliminate or improve.
7.2 Target Costing
Widely used in manufacturing industries, this method starts with the price that the market will accept, then plans the target cost to ensure profit. This forces businesses to design products, production processes and operations to save maximum cost.
7.3 Break-even analysis and flexible budgeting
Through break-even point analysis and flexible budget planning for each business scenario, businesses can quickly adjust operations to market fluctuations, avoid waste and ensure stable cash flow.
7.4 Application of automatic accounting and cost management software
Using digital platforms like Bizzi helps automate document processing, track costs in real time, reduce errors, and improve detailed cost analysis by department, project, or customer.
8. The role of business cost management in management decision making
In today's volatile business environment, business cost management Not only is it a tool to help businesses cut costs, it also plays a strategic role in management decision making. When costs are effectively controlled, businesses can accurately determine the break-even point, develop reasonable pricing plans, and optimize long-term profits.
By analyzing expenses by activity, department or project, managers have a basis to evaluate operational performance, thereby making decisions to improve processes, allocate resources appropriately and invest in the right areas. Effective cost management also helps businesses detect early signs of waste, loss or deviation in operations - a vital factor to improve competitiveness.
According to Circular 200/2014/TT-BTC, the monitoring of production and business costs is clearly regulated through accounting accounts, in which account 154 is the center in reflecting production, processing and service costs. However, not all businesses have enough resources to closely monitor and analyze financial data effectively.
9. How does the Bizzi platform support “Business Cost Management”?
As a pioneer platform in the field of accounting and financial process automation in Vietnam, Bizzi not only stop at digitizing invoices but also provide comprehensive solution support businesses to manage costs effectively – from Collect, process input invoices, set up budgets, until Analyze, control expenses and manage debt.Outstanding features of Bizzi in cost management:
- Automate invoice & document processing: Bizzi technology application Modern AI and OCR to automatically extract data from input invoices. This helps to minimize errors due to manual operations, shorten processing time and improve the accuracy of accounting data.
- Smart cost classification: The system allows automatic expense classification by groups such as production costs, sales costs, business management costs, personnel costs, etc. to help managers quickly grasp the overall picture of spending structure and operating efficiency.
- Real-time spending control and analysis: From an intuitive dashboard, businesses can track budgets, detect overspending, and proactively adjust financial plans.
- Clear budget management and spending policies: Bizzi allows you to set up budgets for each department and project, and apply transparent internal spending regulations, helping to control cash flow more tightly.
- Effective debt management & reconciliation: Bizzi provides debt tracking tools for each supplier, automatic debt reminders, and payment status updates – minimizing the risk of forgetting/late payment, increasing financial reputation.
- Real-time expense reporting: Bizzi provided dynamic cost reporting, updated in real time, allowing daily spending to be tracked and compared to the budget plan. From there, businesses can proactive adjustment Spending plan, optimize cash flow and respond flexibly to market fluctuations.
- Easy integration with existing accounting software: Bizzi is compatible with many popular accounting systems such as MISA, SAP, Fast, help automatic data sync and create a closed accounting - financial ecosystem, optimizing financial management and analysis efficiency.
With these features, Bizzi is more than just an accounting automation tool, which is A powerful assistant to help businesses proactively manage costs, optimize cash flow and enhance long-term competitiveness.
Conclude
Business cost management is an important part of helping businesses optimize resources, control operational efficiency and increase profits. Applying modern cost management methods, along with support from technology, will help businesses make decisions faster, more accurately and more flexibly in the context of increasingly fierce competition.
Bizzi – an accounting process automation platform – can be a powerful assistant to help your business make costs transparent, save time processing invoices and improve financial management efficiency. If you are looking for a digital solution to better control costs, do not hesitate to contact us. Bizzi to get advice on solutions suitable to the scale and development goals of the business.
Sign up for a free trial with Bizzi: https://bizzi.vn/dang-ky-dung-thu/