What are the intangible costs?

Intangible costs are any costs that have a negative impact on the performance of the company, but it is not necessarily used on a specific line item or the cost of accounting books. Instead, these costs occur in a way that affects the overall function of the company. Intangible costs may be expenditure that occurs when upgrading to the production line, implementing changes in the benefits of employees, or any factor that affects the relationships developed with customers.

One of the simplest ways to understand intangible costs is to consider the problem of employee productivity. When employees are happy and feel appreciated by a business, their productivity rate is usually almost almost the effectiveness of the tip. If any event has a negative impact on the relationship between the employee and the employer, there is a great chance that the degree of productivity will fall. This change of production can be called intangible costs, which is caused by that in goodwill between employees and employers.

changes in the benefits of employees can often lead to intangible costs. For example, if the company decides to remove group health insurance in the cost of reducing costs, the company will save a significant amount during the year. At the same time, this loss of insurance will have an unfavorable impact on employees who will tend to be less devoted. As a result, production decreases and business is unable to produce at the same level as before. While the company saved money by reducing health coverage, savings are lower than originally, as production has decreased due to action.

The same general idea can lead to intangible costs that include the company's customers. There would be a problem, for example, delayed delivery at a major order or a problem with a customer care representative, change the negative perception of the client's business, there is a possibility that the client begins to look for another supplier. AfterThe client will start migrating his business to the new supplier. Intangible costs for the original supplier are loss of income and loss of weighted client.

Intangible costs tend to come from a factor or set of factors that have somehow reduced or weakened. The costs may be in the form of a limitation of labor that requires the remaining employees to take over other obligations, reduce the benefits of employees, or make changes in the product line that customers do not regret. In any case, the potential for business is adversely affected, and thus has become less productive, significantly increased.