Indirect costs; also known as overheads; are expenses that cannot be directly attributed to a specific product; project; or service but are essential for an organization's overall operations.
Unlike direct costs; which are easily linked to a particular activity; indirect costs are shared across multiple functions and departments.
These costs encompass a wide range of categories. Some common examples are administrative expenses; Office Supplies; MRO costs; Food and catering; Travel; Digital Marketing; Telephone or IT costs; and Freight. Facility-related costs; including rent; utilities; and maintenance; also fall under this category.
Other less obvious examples include depreciation of shared equipment; general liability insurance; working capital and injury claims management. These are still viewed as indirect costs.
The list of costs that fall under this banner is quite extensive.
These expenses occur daily across most organizations and are often viewed as shared despite frequently being allocated to specific departments.
What is known is that these indirect costs can be a source of untapped savings that can significantly benefit an organization. Whether it is capital for new investments; resources to recruit more employees; means to increase competitiveness or profit optimisation; this area is an untapped opportunity for organizations.
ERA Group has built a successful global business by helping organizations tap into this much-overlooked part of the business; often with spectacular results.
"If you're concerned about any specific areas of cost management; reach out for a chat. Most businesses know there are savings within their cost base; but often; they don’t know how to get those savings; or it’s too time-consuming.”
Grant Morrow Principal Consultant +61 415 203 575 gmorrow@eragroup.com
