Uncontrolled spending is damaging for a company especially if there are no financial leveraging strategies. Spending too much can cause less profit for the business that can eventually lead to operational losses. Because of this, a company whether product or service oriented must have ways to monitor all of the costs that they are incurring. This infographic provides two types of spending that must be monitored diligently.
1. Probably the biggest chunk of financial budgets will go to direct spending. An expenditure that is used for the production of products such as raw materials, direct labor, components, hardware, machinery, and other direct costs can be easily measured, monitored and controlled. Usually, these materials are bought in large quantities in which suppliers will provide contracted price which is lesser than market prices.
2. Indirect spending, on the other hand, is the expenditure for support services or overhead costs. These are not directly related to production but are essential in ensuring a smooth flow of operations. A lot of companies have underestimated their indirect expenditure because these costs are often used in small quantities but when accumulated it could get as high as direct costs. Managers must be aware of both spendings to ensure that they able to follow the budget.
Created by Mobi Chord