Operating Costs - Grouping Well or not at all?

Your reporting package may dump operating expenses into one large bucket.  All the operating costs come down to one total, such as total administrative or operating costs.  Instead, you may have split your operating costs into a couple different groups, but you still have a big chunk in total administrative costs.  Or you have costs that are part of the administrative total that really belong somewhere else like marketing.
•    It is harder to see bigger trends by area.  Are total marketing costs climbing?  You may miss it.
•    It is tougher to summarize.  Anything that is summarized to a one page financial summary is just total operating costs.
•    It does not match how you operate.  You have different department heads, not just one large administrative department.  It does not line up with what people have control over.
•    It understates some department costs.  You may have some costs that are not allocated out to individual departments.  You do not know what you are really spending in each area.

You end up spending more on some operating costs than you intended to.  You may not get hit with big steps.  You might fall for the creeps.  Little jumps here and there.   Eventually some operating costs are out of control.  You spent more than you ever intended to.


 

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