Cost Management Essay

466 WordsDec 31, 20112 Pages
Cost Management Uptown Clinic, a community mental health agency, needs to determine which costs are necessary and which can be cut to accommodate reduced budgets, while still meeting the needs of the clinic. Based on their chart of accounts, they have a number of non-essential costs that could be cut. The first cost is the amount of advertising. If the clinic is already concerned with an increasing demand for services which they do not believe they have the budget for, there is no need for $9,000 to be spent gathering new clientele. Currently, the agency employs four people in the administration department. I do not believe this is necessary. Having an administrator and an assistant is probably enough; they could still operate without two additional secretaries. The amount of money the clinic spends in accounting and billing costs is high. If they were to talk to their accountants, or look for a different company, they could cut the accounting and payroll costs to $1,800 per year, plus billing costs, which could be done by the assistant, or could be purchased for the same price, or less, as the accounting costs. This brings the total to $3,600 instead of $15,000 yearly costs. The amount this agency spends on custodial services is also too much. They can find a small company to do the inside cleaning and outside maintenance for $7,000 per year, saving them $6,000. If they needed to cut $94,000 in cost, the above cuts would cover $68,400 of the reduced budget. To meet the budget needs though, they would have to take small cuts other places as well. Buying generic brand supplies in bulk, for instance, could save $10,000. Having their professional meetings at times other than lunch (save time and money without full meals) could save the agency $6,000. Cutting each employee’s yearly salary by 2% will save the agency almost $6,000 without having too

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