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The Benefits of Effective Cost Control & Spend Management

Category: B2B News

The pursuit of profit is the single-minded objective of getting into a business. While a lot of factors come into play in helping improve profit-making margins, such as taking into account the latest trends and findings on business intelligence, the topics of cost control and spend management are among the most-mentioned buzzwords, and for good reasons.  

While first-year survival statistics from 2015-2016 showed encouraging trends for small businesses, the rate of business closures is not as bright, with 396,000 against 414,000 startups. It’s true that companies of all sizes can reap the benefits of cost control and spend management, but it’s even more vital for small- to medium-sized businesses, which lack the large capital of the big players, to begin with.

It is here where the purpose of cost control becomes even more meaningful–to be able to survive or even thrive in a challenging economy. This article spells out the benefits of cost control and shows why a great part of your success with it rests on using reliable procurement software

cost control benefits

Forget about the digressing debate on how to open up new revenue streams: to cut costs or to increase revenue? You need to do both.

Cutting costs can lead to diminished sales and lower profit margins in the event of sustained market share loss.  On the other hand, more sales can increase costs, hence, does not guarantee larger profit margins.  It is by striking a balance that you will realize an optimal ROI. That’s why, in the last couple of years, cost management remains a business imperative as a recent survey shows with 71% of companies surveyed aiming to implement cost management strategies in the next two years.

Global Cost Management Trends 2019-2020

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Should you decide to take the cost control route, having good visibility of your ongoing expenses becomes a must. Advanced digital tools like Tradogram can go a long way in providing you better insights on how to implement proper cost control and spend management no matter the size of business you’re running. And of course, other tools like smart budgeting software solutions can also help in reinforcing the benefits of cost control software.



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10 Key Cost Control Benefits

Cost control is the term used to refer to the process of reducing costs in a way that still lets the business perform at a functional level. It’s not rocket science to deduce that keeping costs down is a way of hiking up profits, among many other benefits such as the following:

  1. Manage company debts. Minimizing costs can mean having extra money to service loans or reinvest in the business
  2. Hike up budgets. Saving up monies can translate to having a bigger budget at your disposal for other things like marketing or advertising.
  3. Improve credit rating and worthiness. Reducing your expenses can free up money for paying debt and improving your debt-to-equity ratio. That way, getting loans to scale up in the future will be easier.
  4. Be competitive and stay competitive. Having a bit more money to hire better workers or invest in new tools and equipment can help give you an edge over the competition.
  5. Uplift employee morale. Minimizing costs can mean more finances to grow the company. A thriving business can uplift the morale of your employees, which, in the longer term, can mean better employee retention levels.
  6. Improve productivity. Improved employee morale can translate to a more inspired workforce and, consequently, improved productivity.
  7. Help hike up wages. Freeing up money by minimizing ongoing expenses means more money to reallocate to employee salaries.
  8. Aid in hiring better workers. With more hiring budget at your disposal, you can scale up your operations and hire good quality workers.
  9. Give you a better view of budgets. When implemented correctly, cost control can give you a more realistic grasp of what your expenses are and what you can cut without harming your company’s productivity. 
  10. Tell you what your productivity levels need to be. Knowing your real expenses can help you arrive at the numbers your business needs to achieve, productivity-wise.
Tradogram reorder report

With Tradogram, keeping track of inventory and reorders is a cinch

5 Key Benefits of Cost Control to Small Businesses

Is cost control a tool just for big businesses? The fact is, the smaller the business, the more crucial it is to implement proper cost control strategies. When you have much less capital and liquidity to speak of, minimizing expenses can indeed become a matter of survival. Especially since statistics reveal that 33% of small businesses do suffer from lack of capital and cash flow, the most prevalent of their reported problems.

Common Problem Areas of Small Businesses

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Small businesses and companies stand to gain much from cost control with some of the benefits beyond the obvious financial wherewithal:

  1. The building of stronger ties with suppliers. Freeing up money elsewhere can give you the ability to pay your invoices with suppliers sooner than later. Simply put, it’s the easiest way to foster goodwill with them.
  2. The hiring of more qualified employees. Minimizing ongoing expenses means you’re able to recruit better quality workers and staff. Imagine what this can do to your company’s productivity levels.
  3. An effective hedge against future layoffs. Having employed better quality workers is your protection against having to layoff ineffective staff in the future when tougher times may compel you to take drastic cost-cutting steps.
  4. Improved contract negotiations with vendors. Having a bit more budget means being able to have a better standing as far as vendor payments are concerned. This translates to having a bit more leeway to negotiate better contract terms.
  5. Ability to grow aspects of your business. Taking a look at your company expenses and freeing up some extra money can help you upgrade aspects of your business, like doing small physical improvements, adding a bit more volume to inventories, etc.
Tradogram report builder

Tradogram software allows customization of reports for easy sharing

The Benefits of Digital Tools for Improving Cost Control

It is important to gain better visibility of your spend and cost expenditures since you need to know all the details before you decide on which costs to reduce and which ones to keep as is. And this is an area where a capable digital workflow tool like Tradogram can help. Such a software platform can improve your purchasing workflow as well as oversee and manage all the important stages of your business purchasing workflow with its ideal procurement management software features: 

  • Purchasing. This covers the range of steps starting with the requisition, approval of the request, purchase, receiving, payment, and documentation.
  • Sourcing. This allows you to carefully structure your sourcing plan, file requests, evaluate the negotiation process, aid in the awarding of deals, and document the sourcing process.
  • Supplier management. The feature simplifies multiple vendor management with a handy listing of approved suppliers and their details, helps you evaluate your suppliers, and facilitates the handling of the procurement collaboration with centralized supplier communications.
  • Contract management. It assists in drafting, creating, and storing of contracts; save costs by creating purchase orders from a contract repository; keep track of contract performance; help in renewing or terminating contracts by providing vital information.
  • Spend Management. Your digital tool should give you full spend visibility by tracking budget and project costs as well as help you identify new ways to save with customer spend reports and analytics.
  • Order Management. A useful digital platform should be able to generate sales quotes and manage orders by tracking sales activity and manage client responses, among other ordering tasks. 

Cost Reduction vs. Cost Control: What’s the Difference?

At a time when it seems that “Reduce All Costs” is the default business battle cry, it’s timely to discern what makes cost control different from cost reduction and why it’s crucial to know. There’s little to separate the two, save for the execution or implementation. Cost control vs. cost reduction–understand the difference and get ahead in the game.

Cost reduction involves the following things:

  • Making either long-lasting or permanent cuts to ongoing expenses
  • It usually has more drastic and disruptive effects, especially where it concerns the operational flow. 
  • It also has deep, toxic effects on the people concerned–loss of morale on the part of the employees, and eventual dissatisfaction of customers, which happens when the quality of service eventually suffers.

On the other hand, cost control is about these:

  • It also deals with reductions in expenses but uses data analysis and insights for a more informed set of actions.  
  • It can also be in the form of a more proactive type of planning before making what could turn out to be “bad” investments or an inefficient spend.

Cost Control Isn’t Just a Buzzword, But Growth Enablers

It would even be better if your digital tool of choice can also orchestrate team collaboration apart from overseeing your company’s purchasing activities, the way the Tradogram software can. Having a single platform to accomplish all the needed tasks to implement proper cost controls for your business can eliminate confusion, simplify usage, and encourage greater collaboration among your staff. 

Cost control and spend management are not just buzzwords meant for the big players. With the help of smart digital tools and solutions like Tradogram, you can put them to good use for your business to grow and thrive, no matter the economic climate may be.

Louie Andre

By Louie Andre

B2B & SaaS market analyst and senior writer for FinancesOnline. He is most interested in project management solutions, believing all businesses are a work in progress. From pitch deck to exit strategy, he is no stranger to project business hiccups and essentials. He has been involved in a few internet startups including a digital route planner for a triple A affiliate. His advice to vendors and users alike? "Think of benefits, not features."

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