Introduction
Numerous new ventures face financial challenges. Most of these challenges come from a lack of cash flow, a tight budget, as well as unforeseen events, obstacles, and costs. To survive as a competitor in business industries, new firms must overcome these financial challenges. It is also common for newly established businesses to be tempted to increase their spending at a rate faster than the business plan has foreseen; this poses another financial risk. Entrepreneurs often develop a financial discipline process to control the ballooning costs and to ensure adequate cash flow through the business. Yummy Fast-Food Company Limited will formulate a cost control checklist to help the new company prepare for and overcome financial challenges.
Cost Control Checklist
The company will identify all potential recurring and non-recurring costs.
Allocate specific cost controlling responsibilities to particular departments.
Training employees on cost control.
Creating and monitoring budgets.
Minimizing on warehouse cost.
Timely scheduling of the receiving of perishable goods to avoid wastage.
Improving procurement procedures to identify the most affordable suppliers with high quality products.
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Substituting expensive marketing and advertising with online brand promotions.
Reducing unnecessary company expenses, for instance, substituting a trip to meet a client with a Skype call.
Improving quality control to reduce wastage of raw products.
Reusing and recycling to reduce expenses.
Description of the Checklist
The first step to control costs and expenses by Yummy Fast-Food Company Limited will be identifying all potential recurring and non-recurring costs (Start Up Donut, n.d.). This step is important because it ensures all costs are included in the budget. In the identification step in the checklist, the costs and expenses are identified without much concentration on the price. However, the quantity and frequency of occurrence of the expenses are noted (Lepadatu, 2012). Some of the non-recurring expenses for the business include processing and cooking equipment, furniture, electronics, utensils, raw materials, and procurement expenses. Some of the recurring costs include advertising, wages and salaries, insurance expenses, loan repayment, rent, rates, travel costs, water, electricity, internet, web hosting/domain expenses, and emergency expenses. The identified items are then included in the budget in the order of their urgency and importance to the performance of the company. Identified items that are not relevant will not be included in the budget; this helps in controlling the overall cost and expenditure of the company.
Creating a budget from the potential costs list is another method in the checklist. The company will also develop ways of monitoring the expenses to ensure the spending does not exceed the budget (Dobson, 2012). Unlike the identification list, the budget is specific on the prices of the potential expenses on the list. The budget is developed according to the company’s starting and working capital; it is important for the budget to stay within the limits of the capital. Most of the items in the budget are the recurring and non-recurring costs identified in the previous step. Monitoring of the company’s expenses will be achieved through a weekly review of the week’s spending by the accounting department. The expenses are expected to be within the budget, if not, the procurement of the least relevant items purchased that week will be withdrawn from future expense lists.
By ensuring efficient procurement, Yummy Fast-Food Company Limited will reduce expenses on raw materials while maintaining quality in their products. Effective procurement identifies the most affordable suppliers with high-quality products (Kiiver & Kodym, 2015). The business involves producing a fast-food type that offers customers a high nutritional value compared to the currently produced. The firm intends to put carbohydrates, proteins, and vitamins in considerable quantities to ensure that consumers enjoy the delicious product while avoiding health problems that come from eating processed food. The business will buy farm produce from different producers that are willing to sell at a cheaper price. This strategy will make the company to reduce the cost of production and thus offer its customers more affordable products. The nature of the industry allows the availability of cheaper raw materials making the company reduce the cost of production. They include grains, dairy products, and green produce, with many farmers willing to sell at a considerable amount.
Despite the firm being open to utilizing conventional ways of media advertising that might be quite expensive, the company intends to concentrate most of its advertising and marketing efforts on online promotions. Substituting television and radio ads with social media and internet marketing will reduce the advertisement expenses significantly (Flanigan & Obermier, 2016). The company will utilize various promotional channels for advertising such as shows and exhibitions. The firm will also maximize Internet usage by creating a website and joining various social media platforms. The marketing plan will help the company pass information to the target market about its products in the appropriate time and form. The timing of the media advertisement will be considered to reduce the cost of advertising by removing non-consequential advertisements from airplay. The firm intends to develop a website that displays its products to online customers. It will use this tool because many middle-income earners have significantly embraced digital media to get information. The firm will also minimize the cost it incurs in advertising its various commodities by carrying out the majority of its promotions on its official website. This technique allows online visitors to get the information within the first seconds after logging. The company’s department in charge of marketing will update the site weekly to pass the latest news such as a change in price or introduction of certain offers. The firm intends to use the social media phenomenon by creating pages on Facebook, Twitter, Instagram, and YouTube, where potential customers can get vital information. Another way the firm can reap marketing benefits from social media platforms is through influencers. Specific individuals with a huge online following can act as good marketers of nutritious fast food. They can inform their fans about the benefits of consuming the product. The firm can use social media influencers once per month to minimize marketing costs.
Creating awareness and training the company staff on the importance of cost control will also help reduce the expenses of Yummy Fast-Food Company Limited. This will be achieved through the introduction of the topic to new members of the team and weekly updates on ways employees can help in the company’s goal to reduce cost. Minimizing warehouse cost by ordering the appropriate amount of food is another method of cost control; the department allocated this responsibility should be well trained on this method. The department in charge of procurement should also be trained on the importance of identifying expiry dates of perishable items before purchasing them. This will reduce the wastage of raw materials which will reduce the overall expenses by the company. The department in charge of the production, manufacture, and cooking of the company’s food products should also be well trained to reduce wastage of raw materials in their respective operations.
Reusing, recycling, and the use of green energy will also be used by the firm to reduce the cost of electricity and water. Collected rainwater will be used in completing tasks such as cleaning floors and the toilets (Start Up Donut, n.d.). To cut the operational costs, the firm will also include the adoption of green energy to reduce electricity consumption as well as introduce automation of its operations to minimize expenditure on salaries and wages (Shim et al., 2012).
Conclusion
New ventures face financial challenges as a result of a lack of cash flow, sticking to a tight budget, as well as unforeseen events, obstacles, and costs. Overcoming these challenges is necessary, and Yummy Fast-Food Company Limited has developed a cost control checklist to help the business with its financial discipline. Some of the methods of cost control outlined in the checklist include identifying all costs, creating and monitoring the budget, improving procurement, training employees, using green energy, recycling and reusing, quality control, and utilizing internet and social media advertising.
References
Dobson, M. (2012). Project Risk and cost Analysis . American Management Association.
Flanigan, R., & Obermier, T. (2016). An Assessment of the Use of Social Media in the Industrial Distribution Business-to-Business Market Sector. The Journal Of Technology Studies , 42 (1). https://doi.org/10.21061/jots.v42i1.a.2
Kiiver, P., & Kodym, J. (2015). Price-Quality Ratios in Value-For-Money Awards. Journal Of Public Procurement , 15 (3), 275-290. https://doi.org/10.1108/jopp-15-03-2015-b001
Lepadatu, G. (2012). The Importance of the Cost Information in Making Decisions. https://www.researchgate.net/publication/227487376_The_importance_of_the_cost_information_in_making_decisions.
Shim, J., Siegel, J., Shim, A., & Shim, J. (2012). Chief Financial Officer Fundamentals . Wiley.
Start Up Donut. Controlling Costs - Checklist . Startupdonut.co.uk. Retrieved from https://www.startupdonut.co.uk/financing-a-business/cash-flow/controlling-costs-checklist.
