Business Tips From ‘A Christmas Carol’ - I came across this article by By Jen Schiller with business tips from A Christmas Carol one of my favorite this time of the year. Enjoy, Don As the holida...
Tuesday, March 10, 2009
Cost Effectiveness and its Importance
Do the benefits of providing a service or product outweigh the costs? How efficient is a particular process? Which is the most cost effective method of doing a job?
To stay competitive and profitable, all of these questions need to be asked and answered in the every-day running of your business.
Today, I would like to look at each of these 3 questions in a bit more detail:
1. Do the benefits of providing a service or product outweigh the costs?
Doing a cost-benefit analysis will answer this question. A cost-benefit analysis can be done on either an individual product basis or on a project basis.
Doing a cost-benefit analysis weighs the total expected costs against the total expected benefits and provides estimates of the costs and benefits PRIOR to implementing a service or producing a product.
The process may uncover unexpected costs as well. A cost-benefit analysis can help a company set priorities where resources are limited.
2. How efficient is a particular process?
Efficiency analysis is the process of analyzing how efficient a current process is and from this analysis determining areas where improvement or change may be necessary.
3. Which is the most cost effective method of doing a job?
Cost effectiveness analysis is the process of comparing resource allocation alternatives to assist in determining the most effective and/or least expensive way to produce something or attain a particular beneCost effectiveness analysis is also used to measure the financial cost of arriving at a specified outcome. If something is dubbed “cost effective” it is considered to be good value.
Cost effectiveness analysis supports objective decision making. It is often used wherever resources are limited.