Costs - Evandir Megliorini

Costs: Why They Matter and How to Get Them Right

In his groundbreaking book, Costs: Why They Matter and How to Get Them Right, Evandir Megliorini argues that costs are not just a necessary evil of doing business, but a strategic tool that can be used to create value and drive growth. Drawing on his decades of experience as a management consultant and professor, Megliorini provides a comprehensive framework for understanding and managing costs, and shows how companies can use costs to gain a competitive advantage.

Why Costs Matter

Costs are a critical factor in any business, but they are often overlooked or misunderstood. Megliorini argues that costs are not simply a matter of accounting, but a strategic issue that can have a profound impact on a company's performance. He identifies three key reasons why costs matter:

• Costs affect profitability. The cost of goods sold (COGS) is a major expense for most companies, and it can have a significant impact on profitability. By reducing COGS, companies can increase their profits and improve their bottom line.
• Costs affect cash flow. Cash flow is the lifeblood of any business, and costs can have a major impact on it. By managing costs effectively, companies can improve their cash flow and ensure that they have the resources they need to operate and grow.
• Costs affect competitiveness. In today's competitive business environment, companies need to be able to produce goods and services at a competitive price. By managing costs effectively, companies can reduce their prices and gain a competitive advantage.

How to Get Costs Right

Megliorini provides a comprehensive framework for understanding and managing costs, which he calls the "Cost Management Framework." This framework consists of four key elements:

• Cost awareness: The first step to managing costs is to be aware of them. This means understanding what costs your company incurs, and where those costs come from.
• Cost control: Once you are aware of your costs, you can begin to control them. This means taking steps to reduce costs, such as negotiating with suppliers, improving efficiency, and automating processes.
• Cost allocation: Once you have controlled your costs, you need to allocate them to the appropriate products or services. This will help you to understand the profitability of your products and services, and make informed decisions about pricing and marketing.
• Cost reduction: Finally, you need to continuously work to reduce costs. This means looking for ways to improve efficiency, reduce waste, and find new ways to do things.

The Benefits of Cost Management

By following the Cost Management Framework, companies can achieve a number of benefits, including:

• Increased profitability: By reducing costs, companies can increase their profits and improve their bottom line.
• Improved cash flow: By managing costs effectively, companies can improve their cash flow and ensure that they have the resources they need to operate and grow.
• Increased competitiveness: By reducing their costs, companies can produce goods and services at a competitive price and gain a competitive advantage.
• Improved decision-making: By understanding their costs, companies can make better decisions about pricing, marketing, and investment.
• Increased shareholder value: By managing costs effectively, companies can increase their shareholder value and make their stock more attractive to investors.

Conclusion

Costs are a critical factor in any business, and they can have a profound impact on a company's performance. By following the Cost Management Framework, companies can achieve a number of benefits, including increased profitability, improved cash flow, increased competitiveness, improved decision-making, and increased shareholder value.

If you are serious about improving your business's performance, then you need to read Costs: Why They Matter and How to Get Them Right. This book will provide you with the tools and knowledge you need to take control of your costs and drive your business to success.