An Alternate View of Department Expenses - Controllable versus Uncontrollable
Written by the Controller | CFO Advisor Team
When business owners or department heads review monthly expenses, are they burdened with a lot of line item expenses that they do not know how to influence? Do they understand what these numbers mean to them? Are they compared to a budget? One way to assist the business owner/department head “weed through” the financial data is to identify costs as being either controllable or uncontrollable. Controllable expenses are those that can be directly managed month to month by the action of the owner/manager. Of course all costs are theoretically controllable, but generally, uncontrollable costs can be defined as those that cannot be easily changed. For example building rent is a fixed cost that the owner/manager has little control over on a monthly basis.
As an alternative, the business owner/department head should consider splitting monthly expenses in two categories: controllable and uncontrollable. Isolating and highlighting the controllable costs provides the owner the ability to focus on the little changes that can have a positive influence on the company’s profit and loss.
2009 YTD |
2009 YTD |
||||
Actual |
Budget |
||||
Uncontrollable Expenses: |
|||||
Payroll Taxes & Fringe Benefits |
163,289 |
163,000 |
|||
General Business Insurance |
56,443 |
57,000 |
|||
Depreciation |
252,189 |
249,000 |
|||
Real Estate Taxes |
22,453 |
22,500 |
|||
Utilities & Telephone |
249,245 |
250,000 |
|||
Rent - Warehouse |
32,115 |
32,200 |
|||
Janitorial / Scavenger |
5,698 |
6,000 |
|||
Equipment Lease |
19,223 |
19,000 |
|||
Legal Fees |
21,873 |
5,000 |
|||
Interest Expense - Building |
66,234 |
66,200 |
|||
Interest Expense - Line of Credit |
63,214 |
63,200 |
|||
Controllable Expenses: |
|||||
Bonuses |
75,400 |
80,000 |
|||
Donations |
14,200 |
10,000 |
|||
Training / Education |
15,145 |
15,000 |
|||
Supplies - Computer Software |
2,354 |
2,500 |
|||
Supplies - General |
13,483 |
14,000 |
|||
Dues & Subscriptions |
4,200 |
4,000 |
|||
Auto & Truck Expenses |
9,689 |
10,500 |
|||
Meetings Expense |
4,582 |
4,000 |
|||
Miscellaneous / Other |
1,250 |
2,000 |
BIK’s outsourced Controller|CFO Advisors can help analyze your company’s cost structure and establish reports to review controllable and uncontrollable costs.
The BIK Controller|CFO Advisors:
Tony Battaglia
Tim Beck
Al Knox
Larry Schmitt
Together we can perform a variety of accounting and financial services to help your business run more efficiently and economically. Our objective will be to improve your bottom line through better processes and procedures. Contact us today at cfoservices@bikcpa.com or call 847-281-3209.
Visit our web-site at www.bikcfoservices.com.