Полещук Н.А.

УО Белорусский государственный экономический университет

Cost management in business

Within the market economy when the competition between suppliers of goods and services increases there is a growing interest to the new methods and approaches in business management. Recent management concepts are based on the knowledge that business should be clearly defined, measured, analyzed and improved. Business-engineering and cost management are the new management systems.

Business-engineering is a system of creating a business as an engineering science by way of designing and conducting business-processes. It denominates the new process approach in management. In comparison with functional approach the organization considers as a set of processes having different objective levels. According to this approach the whole technological process from receiving materials to delivering final product to the customer consists of single business-processes that generate costs.

Dynamic changes in business conditions and process approach require adequate estimation and planning of cost methods. Efficient cost management allows not only to plan and estimate costs but also to analyze and reveal the correlation between their individual types, to find the reduction reserves, to calculate the degree of cost influence on indicators of organizations within the single chain of their interrelations in producing final commodities.

Cost sharing in modern complicated production-economic systems is more difficult than traditional. Cost management is a business instrument of a high economic result achievement. During the last years foreign theory and practice of cost management moved far ahead. The integration possibility of own experience and foreign achievements in this field determine the direction of the scientific search.

The description of business-processes means that each of it must have the finished cycle and consist of subruns. These subruns include single operations. At the same time every organization should be considered as a part of a value chain (Porter, 1985) which starts from raw materials extraction and finishes with product utilization. The value chain of a company is a system of interrelated types of activities. We can charge about the connection between them by the way one type of activity influences on the costs of other ones. Such connections imply the alternative ways of performing activities that need to be optimized. Optimization in particular specifies the search of compromised decision. For example, the usage of high quality component or more expensive materials can reduce the posttransaction service costs of a product. Therefore, in order to get and maintain competitive advantages the company ought to perceive not only that part of chain it participates in but the whole system of value delivering.

Within the technological chain of business-processes it’s very important to identify the costs that arise as materials and finished products move from producers to customers. Of a great matter is to classify them on fixed charges and variable costs, and to choose the factors that influence on their changing. Defined processes and connected with them costs in this chain create or don’t create a surplus value, increase or don’t increase the product worth. For example, a long storage of commodities doesn’t create tangible surplus value and doesn’t increase worth for customers.

In order to define costs in business-processes more accurate it is important to have a clear idea of the business final results. For this reason we should make use of a word “mission” that means the set of goals satisfying needs and customer service. By its nature mission oversteps the traditional boundaries of company activities. Missions can be defined in the form of a concrete order, a type of service, a consignment of goods, etc.

Lately the interest to well-known foreign method of mission cost calculating increases. Its practical adaptation requires the necessity to reveal cost centers within each activity type of organization that participates in business-process realization. While defining the worth of cost centers which are connected with mission fulfillment it’s necessary to clear up what kind and amount of costs can be avoided if a certain client wouldn’t be served any more. Along with this the client benefit analysis should be taken. Customers with low purchase amount can be profitable by indicator of relatively low cost acceleration in service.

One of the methods that can be efficiently used for description, measuring, analysis and business-processes improvement is the ABC-method. It allows showing the body of interest as a set of interrelated and interactive functions. ABC-method is an effective tool of revealing excessive costs in accomplishing concrete business-processes.

ABC-method assumes the set of functions analysis within the bounds of definite business-process. At the same time the company should decide the issue how can be every function performed at the lowest costs. The cost economy can be achieved first of all by miscellaneous functions.

During the ABC-method organization can work out “functional perfect model” of business-process and reveal a hyper effect by eliminating the technological and management scarcity of material and product flow. The use of this method allows to reduce (directly and indirectly) the costs of business-processes realization due to considerable time diminishing and quality service improvement.