What are business management costs? Meaning and effective optimization
Management costs not only help administrators control cash flow well but also help companies optimize profits and resources effectively. So what are business management costs ? What does this cost include and how is it calculated? Let's find out with 1C Vietnam through the information in the article below.
1. What are business management costs?
Enterprise management costs are the total costs used to operate and manage the production and business activities of the enterprise and a number of fixed costs such as purchasing office equipment, marketing costs, office rental costs,... (According to Circular 200/2014/TT-BTC guiding the corporate accounting regime and the Accounting Law 2015).
Clearly determining what business management costs include will help companies control spending during the month and year, thereby helping state agencies clearly understand the business's cash flows to collect taxes. according to the law.
2. What do business management costs include?
Any business needs to clearly understand management costs and detailed statistics, clearly dividing the amounts therein. Join 1C Vietnam to learn about types of business management costs through the table below.
No | EXPENSE | CHARACTERISTIC |
first | Cost of materials management | Includes costs for purchasing materials used in management work including: stationery, tools, work support tools... materials for repairing fixed assets (fixed assets). |
2 | Employee management costs | Includes all types of costs for personnel including: salaries, allowances, health insurance, social insurance,... |
3 | Office supplies costs | Includes costs for purchasing tools and office supplies. |
4 | Depreciation and amortization | This is the depreciation of fixed assets such as office rent, machinery and equipment, materials, transmission media,... |
5 | Taxes and other fees | Including taxes such as license tax, land tax, other fees and charges, etc. |
6 | Redundancy costs | This expense includes bad debts, provisions for payables,... |
7 | Outsourcing costs | Includes external purchases to support business management such as: patents, technical documents, rental of fixed assets, costs paid to subcontractors, etc. |
8 | Other costs | Including other expenses such as: transportation costs, staff costs, etc. |
3. Accounting for enterprise management costs according to Circular 200
Circular 200 of the Ministry of Finance of Vietnam has clear regulations on revenue and cost accounting. To better understand what business management costs are, let's refer to the following information.
The structure and content table reflects business management expenses in account 642 | |
DEBIT SIDE | YES |
– Business management costs incurred during the period: Includes items such as employee salaries, allowances, management materials, depreciation of fixed assets, office supplies costs, fees and related charges, taxes ,… – Provisions for receivables and provisions for payables: The difference between periods helps adjust provisions based on new actual numbers. | – Reductions in business management costs: Including adjustments to reserve fees or adjustments at the request of regulatory agencies. – Reversal of provisions for payables and doubtful receivables: The amount of provisions that must be made in this period must be smaller than the amount of provisions that have been made in the previous period and have not been fully used. – “Determine business results”: Transfer business management costs to account 911: Integrate costs into the company's business results report. |
In business management expenses, account 642 will have no ending balance, which means that the recorded fees will be transferred to another account as mentioned above. In particular, account 642 also has two related level 2 accounts, respectively:
Account 6421 – Selling expenses: Reflects actual selling expenses incurred in the process of selling products, goods and providing services during the period of the enterprise and the transfer of selling expenses to the account 911 – Determine business results.
Business management expenses - Account 6422: Shows the company's general management costs incurred during the period and the results of the process of transferring business management costs to account 911.
How to calculate management costs in a business includes 7 steps:
- Determine expenses related to management work.
- Record expenses in the accounting system.
- Collect data information.
- Check and adjust.
- Cost calculation.
- Cost transfer.
- Prepare results report.
In addition to this calculation, depending on the provisions of law and accounting methods, business management costs are calculated using different methods. However, to ensure accuracy and legality, businesses can consult detailed information from accounting experts or regulatory agencies.
4. Meaning of determining and managing business costs
If a business wants to operate smoothly and transparently, it needs to be clear in managing business costs. Understanding and determining what business management costs are will bring the following benefits:
- Helps business managers control the company's business activities quickly.
- Helps businesses estimate business activities, clear material norms and personnel workdays.
- Helps managers make effective investment, selection and sales pricing decisions.
- Optimize the use and management of resources in the enterprise.
- Motivate personnel to be more responsible in using company resources more reasonably and economically.
Business management costs help business managers control the company's business activities quickly.
5. How to effectively optimize management costs in businesses
Optimizing business management costs not only helps save resources but also improves product quality. Below are ways to help optimize effective management costs that businesses can refer to:
- Optimize business management activities: Businesses need to build clear and specific working processes to limit stagnation and affect the company's operating performance. In addition, businesses also need to check, identify and cut redundant activities to optimize expenses.
- Apply modern technology in production: You should use management software, human resource management, financial management, etc. to optimize personnel costs and save time effectively.
- Choose the best supplier: Select and carefully consider suitable suppliers that meet necessary requirements such as: product quality, service, cost,... helping businesses save a lot of money. no small expense.
Thus, the above article has explained in detail what business management costs are . Mastering professional knowledge about the characteristics and principles of cost calculation will help managers perform their roles well, contributing to the strong development of businesses. Don't forget to follow other articles on the 1C Vietnam website to update useful information about business management!