1. Overall cost control theory
Some financial personnel may think that this has nothing to do with our finances, and it has nothing to do with financial management. The integration of business and finance and cost BP that we often mention actually need to play their due value here. How to understand this problem? Whether it is the boss or the financial staff, one has financial management theory but lacks the systematization of theory, and the other is looking for a universal financial management tool, but has not looked for a plan that can be implemented. For the systematic theory of cost reduction and efficiency increase, the following cost control system control is made.
In the "Overall Cost Control Theory Chart" in the cost control chart, the innermost iron triangle is built on the basis of management needs "responsibility and rights", otherwise any management will be effective. At the same time, three kinds of capabilities need to be built around "responsibility and rights". The iron triangle outside is the comprehensive application of several financial management tools. Finally, around financial management tools, we need to plan and reduce costs according to the business characteristics of each enterprise. specific plan.
Many financial personnel scoff at the systematic theory, thinking that it is a myth, and you can just give me a cost control plan and tax planning plan. But the real cost control must be combined with tax planning, and there must be a set of systematic theories to guide, otherwise it is easy to fall into the control of "replacing a used refill with a new refill".
Why do many cost controls fall into theorization when there is no systematic financial management theory?
For example: the current profit margin of a certain company is 10%, and the boss states that to achieve the target profit of 20% next year, how much should the sales grow? Or how much should the cost be reduced? This kind of question rarely appears in this way in practice, but the financial management exam and us financial people like to use this kind of example.
First, let’s review the following formula: Breakeven point business volume = fixed cost / (unit price - unit variable cost) = fixed cost / unit marginal contribution breakeven point sales = breakeven point business volume * unit price breakeven point revenue = fixed cost / (1-variable cost/sales revenue)=fixed cost/(1-variable cost rate) Then we calculate according to the formula, assuming that the enterprise's income is 10 million, after splitting the various costs of the enterprise according to fixed expenses and variable expenses , the fixed cost of the enterprise is 3 million, the variable cost is 6 million, and the variable cost rate is 60%. At this time, the break-even point sales volume is 300/(1-60%)=7.5 million.
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If 20% of the target profit is to be achieved, the cost plus the target profit can be used to calculate the sales volume corresponding to the target profit. Similarly, adding the variable cost ratio to the target profit rate can calculate the corresponding sales (that is, the sales revenue under the target profit rate). 300/(1-60%-20%)=15 million, 1500/1000=150%, that is to say, sales need to increase by 50% in order to achieve the profit target of 20%.
The financial manager took the result of this calculation and told the boss and the business department, you can increase sales, does this work? From the perspective of cost reduction, assuming that the fixed cost is reduced by 1000=FC (fixed cost)/(1-60%-20%) FC (fixed cost)=1000*(1-60%-20%) FC (fixed cost ) = 2 million assuming variable cost reduction 1000 = 300/(1-VC%-20%) VC% (variable cost rate) = 50%. Through calculation to achieve profit from 10% to 20%, from the perspective of cost reduction , the fixed cost will drop from 3 million to 2 million, a drop of 33.33%, and the variable cost will drop by 17%.
If financial management only stops at calculating a ratio according to the formula, there is a high probability that everyone from the boss to the business department will think that your calculation is useless. The reason is that we are trapped in specific financial theory, but there is no systematic financial theory. Because real business and financial integration is not to show an "algorithm" and give a textbook indicator, but to provide a path for specific measures. In order to further explain why systematic cost reduction theory is needed to guide cost reduction, I will briefly explain the following cost reduction projects. How to put the cost reduction theory into practice under the "overall cost control theory map"? Or in the process of reducing costs and increasing efficiency, how does financial management intervene? In the above breakeven point case, among revenue, fixed cost, and variable cost, a small decrease in variable cost has a greater change in profit.
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If the cost control is further extended, it is necessary to find out the key items of the company's variable cost items under the "overall cost control theory map", and find out the cost reduction measures according to the current status of the expense items. At the same time, finance needs to obtain the current value and benchmark value of financial data, and then set "three-level goals" and responsibility costs. In the entire cost reduction process above, with the cost responsibility and the action measures of various departments, it is also necessary to embed "profit", that is, performance management. For example, in the maintenance cost reduction project, the average daily maintenance cost in 2022 is 2.1, and the value must be guaranteed to be 1.8, so the benefits are calculated according to the guaranteed value: the estimated output in 2023 is 1 million tons, the ton is reduced by 0.3 yuan, and the realized benefit is 0.3 yuan/ton× The estimated output is 100=300,000 yuan. Enterprises can set up relevant bonus distribution plans based on cost reduction performance.
2. Systematic operation of cost control
Financial personnel need to further extend under the financial management formula, and embed financial management tools into cost reduction and efficiency increase. But even though our financial personnel have an overall understanding of cost reduction, there is still one point that determines whether cost reduction can be implemented, and that is to open up the "two lines of Ren Du" for cost reduction, that is, to make cost control a systematic operation. Rather than "fighting each other".
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Simply put the manufacturing process from research and development to shipment, the point where each link affects each other, financial management needs to carry out cost control in the process of the overall operation. In the absence of a "systematic operation map of cost control", we often hear that financial personnel have the following measures for cost reduction: centralized procurement is used to reduce procurement costs; production costs are reduced, and a large number of students are used during winter and summer vacations; Actual quantity, pay attention to material scrap. However, in systematic operations, cost reduction in procurement requires collaboration among R&D, sales, and procurement to identify cost reduction points for cost reduction. Production cost reduction needs to find targeted cost reduction measures along the route of "sales-production planning-production scheduling-production" based on the "man-machine law material loop".
The reason why cost control is carried out under the "systematic operation map of cost control" is to control the cost of capital. By the way, how does cost reduction and efficiency increase have anything to do with funds?
This in itself illustrates the consideration of capital cost, which is the consideration made in the systematic cost operation map. Regarding capital management and control, financial personnel know that accounts receivable should be optimized to reduce capital occupation. Some people say that accounts receivable should be compressed and accounts payable should be delayed. Specific measures can be: optimize operating advance payment, reduce capital occupation; optimize accounts receivable, reduce capital occupation; optimize reserve fund management, reduce capital occupation. However, after having the awareness of "systematic operation map of cost control", it is necessary to think about capital control from the perspective of the overall production value chain and propose specific countermeasures.
According to the business characteristics of the enterprise, actionable measures can be constructed from three levels: financial level-operational level-action measures. In this way, our financial management will not fall into slogans, such as "optimizing asset structure and improving asset efficiency" at the financial level, or "optimizing accounts receivable and reducing capital occupation" at the operational level. Instead, in the concept of "systematic operation", three-dimensional, multi-dimensional, specific measures based on the relationship between each business are established. nice setting.
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specific improvement measures
1. Improve production efficiency
(1) Optimize production planning and production scheduling
(2) Strengthen production efficiency and reduce material occupation in the production process.
(3) Reduce production line material occupation, improve production rhythm and production efficiency.
2. Optimize on-site redundant assets and reduce capital occupation
(1) Optimize non-productive idle fixed assets and reduce capital occupation
(2) Optimize productive idle fixed assets and reduce capital occupation
(3) Strengthen the management of waste materials and increase the value of recycling
3. Optimize inventory and reduce capital occupation
(1) Strengthen the cycle management of spare parts and reduce the total amount of spare parts
(2) Strengthen material cycle management and reduce the total amount of materials
(3) Control the inventory of semi-finished products and reduce capital occupation
(4) Reduce finished product inventory and reduce capital occupation
4. Optimize solid waste utilization and reduce capital occupation
(1) Optimize tailings utilization and reduce capital occupation
(2) Optimize the utilization of dust removal and reduce capital occupation
(3) Optimize the utilization of other iron-containing materials and reduce capital occupation
(4) Optimizing the application of auxiliary materials, solid waste, and reducing capital occupation Among the above measures, cost reduction measures need to be implemented
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