3 Techniques for Controlling the Office Operating Cost
1. Cost-breakdown technique:
This is a very easy-to-use technique. It primarily involves determination of the standard percentage of total cost of an operation represented by the salary or labour cost, material cost, and an overhead cost. The following percentages are generally considered to be the standards in most office operations.
Salaries (including the fringe benefits) 60 – 70% Supplies and services (including forms, stationery postage, telephone, telegraph etc. 15 – 20% Overheads (including maintenance and depreciation of equipment, taxes, rent, insurance, utilities etc.) 15 – 20% One important thing in controlling the office operating costs is to compare the standards with the actual costs.
If the actual costs exceeds the cost break downs (i.e. standard breakdowns), then the office manager should make an attempt to see why such a deviation exists. He should find out the reasons for deviations in costs and based on that, develop a plan for reducing office costs.
2. Standard costs:
Another important technique that is frequently followed in most offices’ is the ‘standard cost technique. This method comprises of determining the unit cost of various office operations. The unit cost can be determined if the operation can be broken down into several component parts, and the cost for each part of the operation arc identified.
3. Cost analysis study:
Under this technique, the costs of current operations are compared with the costs of office operations in the previous period. For example, salaries of office employees for the current month may be compared with the salaries of the employees in the same month a year ago.
The impact of inflation and corresponding increase in operation costs, in salaries etc., must be taken into account while using this technique for controlling office costs. The consumer price index may be used as a means of adjusting the figures in order to have an acceptable base.