How to analyze management expenses

Management expenses are not directly related to the production or trading activities of the organization. However, a reasonable modern business owner or top manager will not treat them as they did in Soviet times - that is, limit them as much as possible. To make informed decisions about these costs, a thorough analysis of management costs is required.

Instruction manual

1

Administrative expenses include not only the costs of maintaining automated control systems, accounting, the legal department, personnel services, but also travel expenses, hospitality expenses, expenses for communication and for the maintenance of structures that do not have actual production value. All these costs can carry a lot of weight among the total costs, although not always appropriate. It is clear that there is no sense in analyzing such expenses as the costs of maintaining structures. But consider the costs of maintaining some departments more closely, because they are more manageable.

2

The effectiveness of the personnel department is associated with increasing the growth rate of the company, and therefore is analyzed in the first place. Analyze the speed of paperwork, the number of closed vacancies, staff turnover indicators. Compare all these indicators in dynamics. It is often advisable to compare them with similar indicators of the corresponding methods of the previous year, because fluctuations in the labor market have a seasonal cycle. It is also advisable for the leader himself to search for new specialists in personnel. The approach should be closer to the western one when a person is fired not because he does not work well, but because there is a better candidate for the post. An excellent HR specialist will solve many problems in the work of the company.

3

When analyzing the work of the legal department, pay attention to how well the system of minimizing legal risks is established, how efficiently and quickly lawyers cope with problem situations, and whether the help of freelance consultants is required. The legal department can also teach employees the basics of legal literacy. The cost of maintaining such a department pays off especially quickly if the company operates in a highly competitive environment and is constantly faced with the need to legally defend its interests.

4

Appropriateness of representation and travel expenses is estimated by the number of actually concluded transactions and the amount of profit from these events, various forms of public recognition of the merits of the company, such as winning various competitions and obtaining titles like "Best company of the year". If the company is developing successfully and its prestige is increasing, the expenses for the mentioned purposes are justified.