Expenses – The Wise and the Mighty
Expenses hit at the core of all functioning systems. Whether the system is a household or a business, expenses drive the cost of all the services required to have a well-functioning operation. While many view expenses as a drawback, they highlight the collection of decisions made by an organization to acquire all the services and products that contribute to optimal performance.
While some expenses add value, others can hurt. To determine which category your expenses fall into, an expense analysis can help. Consider rating expenditures against the following criteria:
- The requirements the expense meets. Ask yourself if the expense works to provide fundamental items to operate. For instance, nearly all businesses require electricity and internet connectivity. Costs like these go without question because they are a necessity and serve a baseline purpose. These cannot be avoided.
- The efficiency the expense brings. How does the expense make things easier for your operations and your staff? Can the expense eliminate a manual process that is tedious and error-prone? Can it supplant another expense? For instance, adding automation comes with a price tag, but it can also reduce or eliminate labor costs.
- The value the expense offers. How does the expense provide your company and its staff better positioning in the marketplace? For example, will the expense help differentiate your company and create value for your clients or employees? Value-added features can build loyalty among your client base and staff.
- The well-being the expense provides your team. Does the expense provide support and wellness to your staff? Happier staff tends to be more engaged. And more engaged staff is more likely to champion the mission of your organization. Plus, when your team is engaged, attrition is lessened. Low turnover is tremendous for any company.
- The peace-of-mind the expense contributes. How does the expense work alongside you or behind-the-scenes to make sure you aren’t missing anything critical? If your business must comply with governmental regulations, or even SLA terms, paid services that will caution you before something falls off your radar can be a lifesaver.
When evaluating a new expense, if you measure it against the criteria above it can help you assess if it makes sense for your organization. Then, invest time to compare a few companies that offer the product or service that you have in mind. Choose to work with only the companies that meet the aforementioned criteria. Smart buys will not only add value to your organization, but they can help you grow.
Likewise, remember that some expenses will only make sense
for your company in the short term. So, it is wise to re-evaluate all the
expenses for which your organization pays regularly. If the cost no longer
falls in line with the criteria above, its usefulness may have expired and may need to be eliminated.
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