VIEW POINT

COST CONTROL: HOW BUSINESSES

USE IT TO INCREASE PROFITS

Abstract
Cost control has gained a lot of traction in recent times. Data shows that
82 percent of businesses consider cost management in business as the
top priority for sustainable profitability. Cost control has emerged as a vital
element to enhance the profitability and competitiveness of a business. It
helps companies reduce their costs and pass on this cost advantage to their
customers by lowering prices. Organisations approach cost management
in business by adopting different strategies. Outsourcing cost control to a
reliable third party has proved to be a highly effective strategy to control
costs and facilitate sustainable profitability.
All businesses are driven by a profit motive. earned by increasing sales reflects the key factor, the cost of goods sold. The net
In most cases, the focus of a revenue gross income. The net revenue of the revenue reflects the true profitability of the
model is on increasing sales. The revenue business, however, depends on another company.

Net revenue = Gross revenue - (minus) cost of goods

So, we see that the costs incurred while in business has become one of the key management in business as the top priority
manufacturing and selling goods impact a focus areas of business. Data shows that for sustainable profitability.
business's profitability. Hence, cost control 82 percent of companies consider cost

What is cost control in business?

Cost control is the optimisation of business data-based investment decisions. Cost Variable costs: These are procurement
expenses to make it financially stable management facilitates strategic decision costs, energy charges, etc., that change
and profitable. The goal of cost control making, which gives the company an edge over time.
is to reduce the cost of production while over its competitors. Direct costs: These are expenses incurred
ensuring that the quality of the products is A business incurs different types of costs by a business for facilitating its core
not compromised. in the manufacturing process right from functions like the cost of raw materials,
Cost management in business is procurement of raw materials to delivery machinery, etc.
important because it: of final products to the customer. An Indirect costs: These refer to the overhead
• Maximises profitability analysis of all these costs is necessary to expenses that a business incurs for
identify leaks and develop cost control functions like employee engagement, etc.,
• Optimises costs
management strategies to reduce them. that are not directly related to the core
• Improves financial performance
The different categories of costs are: functions of the company.
• Helps increase revenues
Fixed costs: These are costs like rent or
An in-depth analysis of spending patterns
insurance premiums, etc., that remain
and expense patterns helps a business to
constant.
allocate its resources optimally and make

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Process of cost control
Typical cost control in business processes Step 4: Budgeting • Review your processes periodically
goes through the following steps: Establish budgets and cost targets based and streamline them to reduce waste,
Step 1: Establish goals on accurate financial forecasts and track eliminate unnecessary steps and
them against the defined objectives. optimise resource allocation.
The foundation for cost management
in business is laid by establishing cost Step 5: Identify gaps and take corrective • Focus on cost-effective procurement
control goals that align with your business action strategies by negotiating favourable
objectives. terms with vendors/suppliers and
Monitor your KPIs to assess if your cost
maintaining strong relationships with
Step 2: Determine KPIs (Key Performance control management strategies are
them.
Indicators) meeting the desired goals or not. If they
are not, you may need to take corrective • Leverage technologies like artificial
Define metrics for cost performance like
measures. intelligence (AI) to streamline cost
budget variance, cost performance index,
control processes, gain real-time
cost of products sold, gross margins, etc. This process can be augmented by taking
insights into expenses, enhance
Step 3: Cost analysis the following measures:
accuracy and speed, etc. Deployment
Conduct cost analysis to identify • Encourage employees at all levels to
of technological tools helps businesses
inefficiencies and cost-saving be cost-conscious by establishing a
track business performance and
opportunities. robust system where they can be held
manage expenses effectively.
accountable for expenses relevant to
their operations.

Top technologies deployed for cost management in business

Data analytics offer flexibility to the business and make it algorithms can make accurate financial
Data analytics tools enable businesses to scalable. They are easy to implement and forecasts that help to establish budgets.
analyse vast datasets and identify patterns, provide automatic updates. These systems Cost control is not a straightforward
trends and anomalies, etc. These actionable help minimise costs. process as it requires an interplay of
insights are provided to the concerned Robotic Process Automation (RPA) multiple variables. It can prove to be
personnel for data-driven decision-making. RPA tools automate routine processes, time-consuming and cumbersome. One
Enterprise Resource Planning (ERP) reduce errors and help optimise cost of the most effective strategies for cost
management in business. control that has become popular currently
ERP systems build a centralised system
is outsourcing cost control to a financial
by unifying core business processes and Artificial Intelligence (AI)
services company.
functions. This centralised system not AI tools gather data from different sources
only facilitates the seamless collaboration Outsourcing refers to delegating the task
and extract valuable insights for better
between stakeholders, but also helps to of cost management in business to an
decision-making. These tools streamline
monitor business data in real-time. The external agency. Your outsourcing partner
processes, enhance efficiency and optimise
system automates operations and paves takes over the entire task and helps you
costs.
the way for resource optimisation. control costs and boost revenues.
Machine Learning (ML)
Cloud computing
ML is a subset of AI. It is a self-learning
Cloud-based systems provide technology that learns from existing
infrastructure support over the internet. datasets and makes predictions. It is
These systems are beneficial because they relevant to cost control because ML

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 How does outsourcing help
cost control in business?
Access to experts
When you outsource your cost
control to an agency, you can benefit
from the expert knowledge and
experience of professionals in their
team. You do not need to hire and
maintain an in-house team of experts
for your processes which can lead to
substantial cost savings in the long
run.
Access to technology
Most outsourcing agencies leverage
technology tools to streamline
processes. Hence, you can access
technology without investing in
technology tools and infrastructure to
support it. This reduces your business
costs.
Reduce investment in human
resources
When you outsource your cost
control process to a third party, you
do not need to hire professionals with
the required skill sets. Tech talent is
extremely expensive and outsourcing
helps you reduce your expenses.
Besides, you also save on the training
costs and other costs required for
maintaining a skilled workforce.
Flexibility
Outsourcing offers flexibility in
workforce management. It helps you
make alterations in various processes
according to the market demands.
Focus on growth
Your outsourcing partner implements
cost management in business
strategies to optimise costs. This
reduces the time and resources
you need to invest in this task, and
you can channel them towards the
growth of your business.

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Partner up
You can leverage the benefits of outsourcing partner with businesses to can be tailored to their needs.
outsourcing only if you work with a reliable help them reduce their business expenses
outsourcing partner. Infosys works as an effectively by offering them solutions that

How can Infosys BPM help?

Infosys offers BPM in finance that helps different finance operations. We leverage to minimise them. Our cost-cost-effective
businesses streamline business processes cutting-edge technologies to analyse your BPM services can be optimised according
and boosts efficiency and accuracy across business expenses and provide solutions to the unique needs of your business.

For more information, contact infosysbpm@infosys.com

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