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Libby Marks

Achieving Better Profitability with Cost Control

Cost control is the hidden hero of business profitability, boosting growth, stability, and competitiveness. Here’s how to spend smart in your business.

Cost control and profitability – let’s make it personal.

We know making money is the exciting part of business – winning contracts, delivering work, and watching the $$$$$ stream in.

Financial management, on the other hand, is decidedly less thrilling. Monitoring spending, optimizing efficiency, and watching for wastage aren't exactly the stuff that dreams are made of.

But effective cost control leads to higher profitability, which yields all sorts of other benefits.

So, ready to get curious about cost control? Let’s take a look at how businesses can manage costs, spend smartly, and achieve better profitability. 

What is cost control?

Cost control is a strategic approach to reducing unnecessary spending in a business. It’s not about cutting costs – and corners – to the point that your deliverables suffer. It’s about spending wisely while still maintaining quality and service levels.

Without a dedicated focus on cost control, businesses can waste a lot of money. And we’re not talking private jets and lavish offices: it’s much more mundane than that. It’s the insidious drip-drip of a leaky business bucket – from inefficient processes to overstaffing. 

Organizational cost control 

At an organizational level, cost control methods include: 

  • Cost management – Identifying and managing business variables that make expenses go up or down – called ‘cost drivers’ – in a strategic smart way
  • Cost reduction initiatives – Such as streamlining operations, automating workflows, and improving efficiency 
  • Budgetary control – Establishing and monitoring budgets, plus analyzing budget variance to identify wastage or leakage
  • Resource optimization – Optimizing the use of resources to minimize waste and maximize productivity – whether that’s people, facilities, or equipment 
  • Continuous improvement – Constantly seeking new ways to control costs and improve efficiency

Project cost control

At project level, cost control measures can include:

  • Cost engineering – The overall process of estimating, managing, and optimizing project costs for higher profitability 
  • Budget tracking – Monitoring project expenses to ensure they align with the allocated budget
  • Scope management – Managing project scope effectively to prevent scope creep, which can lead to additional costs
  • Earned value analysis – Assessing project performance and improving cost efficiency throughout the project lifecycle
  • Resource optimization – Optimizing resource allocation to ensure that resources are utilized efficiently and cost-effectively
  • Risk management – Identifying potential risks that could impact project costs and mitigating them to avoid project cost overruns

Read our article on the long and short of project cost management for more on this ➡️

Why is cost control important?

Cost control is essential for the success and sustainability of your business, especially when we’re all trying to weather a stormy global economy. Here’s how saving your pennies can protect your profits – and business overall. 

Increases profitability

The less you spend, the higher your profit margin. It’s as simple as that. By controlling your costs, you’ll automatically boost your business profits. 

Enhances competitiveness

By managing your costs more effectively, you can offer more competitive prices, which can make you more attractive to potential customers.

Improves cash flow and stability

Monitoring and controlling costs helps you maintain a healthy cash flow and build financial reserves, providing a buffer against economic uncertainty.

Enables investment

You can invest the money you’ve saved through better cost control in R&D, marketing, employee development…or any other strategic initiative to help your business grow.

Whether you choose to reserve your cost savings for a rainy day – or allocate them for investment and development – cost control can help your business achieve greater stability and sustainable growth.

What areas of a business benefit most from cost control?

Operational costs

You can reduce your operational costs by reviewing processes, streamlining workflows, and automating manual tasks. 

For example, in a project-based service business, you could use collaborative project management tools to reduce the need for status update meetings.

Or introduce resource management software to streamline the process of finding and allocating resources to projects. Each seemingly small time-saving adds up to serious cost control.

Labor costs

This is a big-ticket item in all businesses. Labor cost control doesn’t mean cutting wages or reducing headcount. But it does mean optimizing how you use your human resources. 

For example, upskilling internally rather than hiring already-experienced external talent, optimizing your resource utilization rates, and capacity planning to match supply and demand more closely. 

Overhead costs

Rent, utilities, and admin costs can have a significant impact on overall business expenditure. 

Fortunately, there’s lots you can do to save money on premises – whether that’s the nuclear option of going fully remote and ditching your office costs entirely (like us here at Runn 👋 remote from day one and loving it) or simply renegotiating lease terms and implementing energy efficiency measures. 

You can also save administrative costs through shared service centers, being savvy about software deployment (subscribing rather than buying), and going paperless, for example. 

Key cost control strategies

Now you know where to look for savings, let’s look at some specific cost control strategies in more depth. 

1. Improving resource management

Resource management is a critical component of cost control. If you get it wrong, you could overspend on resources and underutilize their capacity. That’s a great way to lose money and reduce your resource ROI.

This goes doubly for professional services firms or project-based businesses: indeed, in such businesses, getting resource management under control is possibly the most important cost control measure you can take.

Effective resource management involves:

  • Matching the right resources to the right tasks, so you’re not overspending or overservicing  
  • Assigning resources at the right time, so they are ready to be productive, not waiting for work
  • Balancing workload to prevent burnout, which can reduce productivity and increase staff turnover (and associated costs)
  • Prioritizing resource requests, so resources are used where they can generate the highest returns or strategic gains 
  • Monitoring and optimizing your utilization rate so you’re earning, not burning, money

Other cost saving measures involve using data to match resource capacity to anticipated demand so you don’t end up with too many staff, as well as understanding the demand for different roles and skills - and thus anticipating hiring needs and recruiting in a timely way. This helps to prevent project delays and reliance on short-term contractors that are often far more expensive than permanent staff members would be.

This can all be achieved through resource management tools that centralize capacity, availability, and utilization information – and let project managers and resource managers make confident, data driven decision making about resource scheduling.

2. Better budgeting and forecasting

Accurate budgeting and forecasting are essential for companies to make informed decisions and allocate resources effectively. Here are some tips to improve your practices.

  • Consult historical data to make forecasts more accurate – See how similar past projects were resources and whether the projects were successful and on schedule. If not, make appropriate adjustments for forthcoming projects.
  • Conduct variance analysis – Compare forecast budget and schedule with actual outcomes and analyze discrepancies. This helps you learn lessons and make improvements for future projects, ensuring continuous improvement in forecasting accuracy.
  • Carefully balance the need for quality with cost control – Look for the sweet spot where stakeholders are satisfied with the quality of work without over-servicing. This balance ensures cost-effective delivery while maintaining high satisfaction.
  • Monitor budget and burn rate during projects – The sooner you spot variance from budget or schedule, the sooner you can make adjustments to ensure your project stays cost effective.
  • Upskill project managers in budgeting – for example, estimating methods, financial data literacy, and how to create a project budget. Creating a detailed cost estimate is essential for the profitability of your project.

3. Strategic technology adoption and automation 

Obviously, we’re going to say this - we’re a resource management platform. But it's true that strategic technology adoption can cut your costs. It lets you automate manual processes and improve operational efficiency, improve productivity, performance, and profits through data-based decision making, and communicate more efficiently as a team.

Key strategies for cost control through technology adoption include:

  • Using cloud-based SaaS products (subscription-based software hosted online) to reduce upfront purchase and in-house infrastructure costs.
  • Embracing digital transformation initiatives to streamline processes and improve efficiency – like ditching unsustainable spreadsheets for resource management in favor of dedicated resource management tools. 
  • Integrating AI and machine learning to automate data analysis and decision-making processes – for example, automating resource allocations based on cost, availability, utilization rate, etc.
  • Leveraging data analytics to gain actionable insights and drive strategic decision-making – for example, identifying patterns in resource utilization to optimize staffing levels.
  • Using communication technology to facilitate wider business transformation – perhaps even making it possible to go fully remote and save those office costs!

Control costs and increase profitability with Runn 

Runn is packed with fast and user-friendly features to control your organizational costs – as well as create project plans and resource schedules with ease. 

Key features include:

  • Resource scheduling – Easily allocate resources to projects based on availability and skill sets, ensuring optimal utilization and avoiding costly overallocation or underutilization.
  • Budget reporting – Track project budgets in real-time, compare planned versus actual costs, monitor burn rate, and quickly identify and address any variances to stay on budget.
  • KPI monitoring – Generate detailed reports on project performance and resource utilization to inform strategic decisions.
  • Time tracking – Automatically track the time spent on tasks and projects to ensure accurate billing, improve project estimates, and identify areas where efficiency can be improved.
  • Forecasting – Use historical data and predictive analytics to forecast future resource needs and project outcomes, enabling proactive planning and cost control.

Explore Runn for free with a free 14-day trial - no credit card, no commitment, no catches. Just give it a go ➡️

Or book a chat with our friendly customer support team to go through your challenges and see how we can help. 

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