Depreciation in cost of sales is often misunderstood in mining financial modelling, particularly when analyzing unit economics. Using an accounting package is like riding a train: it runs on rails, everything is controlled, and there is no room for error. This is how it must be. There is also no room for experimentation, because experimentation would undermine the consistency, comparability, and security of the system.

Using Excel for mining financial modelling, on the other hand, is like riding a bicycle. It can go wherever the user wants and can provide surprising or unexpected insights. It does not have the security of the train, but it offers freedom. Each mode is correct for its own purpose.

The Role of Financial Statements and Models

The purpose of financial statements is to present the financial results and financial position of a company accurately and in a standardised, comparable way. This is where flexibility in modelling—not in reporting—becomes valuable. In some cases, an unorthodox modelling approach will reveal information that is more useful for a specific decision-making purpose than strict adherence to accounting presentation.

Financial modelling is therefore a practical aid to decision-making, allowing alternative ways of thinking about cost and value.

Depreciation and Cost of Sales in Mining

Depreciation is an expense that accounts for the cost of using an asset. Whether on the train or the bicycle, the principle remains the same: Cost of Sales comprises all the costs required to bring a product to a saleable condition.

While there may be some grey areas, in mining it can be argued that most fixed assets are used directly to obtain the product. Assets are largely single-purpose and production is homogeneous. Under these conditions, depreciation can reasonably be treated as a production-linked cost and therefore included as depreciation in cost of sales when modelling unit economics.

Why Include Depreciation in Cost of Sales?

Why do this? Including depreciation in cost of sales will affect gross profit, but it will not affect operating profit or profit after tax, because depreciation appears below revenue in any case.

The point is not the profit lines themselves, but the signal they send. What we are often trying to determine is not accounting profit, but the economic cost of production for a single unit of output.

Unit Cost as a Key Variable

This is a critical number, particularly where selling prices are controlled or administered. In such environments, profitability is driven primarily by cost discipline rather than pricing power. Unit cost is therefore the key variable that must be understood and actively managed.

That number should not be expected to appear directly within the income statement, which is not designed to reveal economic unit costs. We should not look for it on the train.

Using Financial Models to Calculate Unit Costs

Instead, we must use the bicycle and calculate unit costs separately in Excel, using costs as they actually relate to production.

Hourly labour costs, electricity consumption, floor space, feedstock, and other inputs must all be included. Their proportions must be calculated and their costs itemised, including the hourly depreciation cost of the equipment used—understood as the cost of consuming productive capacity.

From a modelling perspective, the treatment of depreciation should reflect how productive capacity is consumed over time. While accounting standards prioritise consistency and comparability, financial models exist to support decision-making. Including depreciation in cost of sales can therefore provide a clearer view of production economics, particularly in capital-intensive industries such as mining.

1) Don’t make the idea-person do the work

Perhaps the worst habit is asking the person with the good idea to implement it: “That’s a very good idea, Joe—will you see that it gets done?” Slothful Steve never suggests anything and avoids the work. Joe learns that speaking up just gives him more to do without credit, so he stops. Better: “That’s a very good idea, Joe. Steve, please get it going by next week and give me a progress report.”

2) Don’t skip introductions and rapport

“We’ll just dive right in” is a mistake. Groups reach consensus faster if they first build a cooperative spirit. Recognise each person, establish rapport, and acknowledge circumstances (even a brief minute’s silence if someone has suffered a loss, and agrees). Time spent on building cohesion shortens the overall meeting. Give time for discussion and absorption. Rushing through the meeting without giving people time to reflect, absorb, and comment, is a waste of the whole meeting.

3) Build a real agenda (not last meeting’s minutes)

Using the previous minutes as the agenda is a waste of everybody’s time. Construct an agenda in advance so people can prepare and think, and have an opportunity to contribute. Start with the most important and contentious issues, otherwise you lose energy at the beginning, and rush through the really important items. Limit the list to what you can actually cover, note future items, and make decisions in the meeting rather than carrying items over. Ensure needed information is available when you issue the minutes. Allow unexpected matters to be added at the start, allocate them a slot, and don’t tackle them immediately. If someone has simply forgotten something, put it on the next agenda.

4) Don’t read the minutes in the meeting

“Some of us haven’t had time to read the minutes” leads to rewarding the lazy and penalising the diligent. Minutes contain actions that should already be done, and they must be read as soon as possible. Send them out on time and emphasise their importance. If they aren’t important, question whether the meeting is needed at all.

5) Invite contributors, brief everyone else

The right people to attend are those who will contribute by being present. For disseminating information, go and brief others personally on what matters to them and what you expect, instead of forcing them to sit through a full meeting.

6) Don’t wait for late arrivals

Waiting punishes punctual people and teaches everyone to be late. Start on time. Never go back to cover what was missed; welcome latecomers, tell them “we’re on page three,” and carry on. If someone apologises, say “Thank you, I accept your apology.” It closes the loop and encourages punctuality next time.

7) Treat phones like adults do

Don’t lecture about phones. Assume maturity. If someone has an occasional important call, allow it or pause briefly. If someone is persistently distracted, say, “Jabula has an important message to send; we’ll wait for him to complete it.” The social pressure solves the problem quickly.

8) Call out the subtle put-down

When a diligent person finishes their tasks, Slothful Steve mutters, “You must have plenty of time—I’ve been too busy.” Don’t attack, but don’t ignore it. Ask Steve what’s keeping him busy and how he’ll deliver by the next meeting. Offer coaching if he keeps deflecting. The point lands without a fight.

9) Stop the parking lot sludge and cliché dodges

If an item is important enough for the “priority list,” it’s important enough to decide. Otherwise, don’t list it. A base of low-priority items that never get decided becomes meeting sludge. Avoid the double bind of “old question, so we never address it” or “new question, so we won’t address it.” And don’t hide behind rhymes and clichés that sound wise but avoid the issue.

10) Don’t present reports that should have been read

If people submit reports, they should be self-explanatory—and read beforehand. If people want to be lead through them, they are not clear. Provide coaching in report writing. If someone hasn’t read them, they may not need to be in the meeting. Discuss outcomes and corrective actions only with the people who manage them; you may not need the whole group.

11) No “devil’s advocate” as a hobby

There’s a difference between sober risk-spotting and pot-shotting. Devils’ advocates who poke holes without constructive alternatives add little. If you can’t show a real flaw in the theory or propose a better option, you’re not helping.

12) Reduce corporate drag and measure decisions

It’s safer to condemn a new idea than to back it. This delays progress. Valuable time is lost chosing the safe option until approval becomes unavoidable. Call this corporate drag. The Patterson Job Evaluation system rates roles by decision-making; likewise, track meeting effectiveness by the ratio of decisions required to decisions made.

A quick close: meetings should create clarity, commitment, and next actions. If your sessions aren’t producing decisions, change the habits—start on time, set a real agenda, assign work to the right people, and measure follow-through. You’ll save time, reduce “corporate drag,” and get better results between meetings.

Related reading:

• Smart ways to cut wasted time and money: How to Control Costs Effectively
• Building financial judgement across the team: Adding Finance to Your Range of Competencies

If meetings keep stalling because the room can’t read the numbers, JSF runs the practical training that turns finance from a barrier into a tool: Finance for Non-Financial Managers for individuals, Budgeting and Cost Control for the people who own the spend, and Finance Training for Managers for L&D-led group bookings.

Meetings improve when the people in them can challenge the numbers being presented. If that is the gap, ask John what would fit your team.

Here’s why, for most people, the pooled option still wins.

Concentrated risk vs pooled risk

When we go a long time without claiming, it’s tempting to think self-insurance would be cheaper. But risk inside one company (or one household) is concentrated. Insurers spread that same risk across thousands of policyholders, which is why the model works.

Immediate cover beats slow accumulation

External insurance gives you cover today. Self-insurance requires time and discipline to build a fund.

About that inheritance example:
A lump sum (like an inheritance) helps with cash flow—you can pay the bill immediately—but it doesn’t make the loss go away. If you spend R80,000 of inherited money to replace a burst-geyser mess and fried electronics, you’ve reduced the value of that inheritance by R80,000. That’s not a “saving”; it’s simply using different money to absorb the loss.

Savings only show up when the source of the payout is the premiums you didn’t pay because you were self-insuring—and even then, only if those saved premiums over time exceed the losses. Until a self-insurance fund has been built (and ring-fenced) from actual premium savings, you’re just spending capital.

Simple test:
If the money you’re using didn’t come from a disciplined, dedicated “premium-savings” pot, you haven’t saved—you’ve funded the loss yourself.

For smart ways to think about resourcing and spend, see Head Count Doesn’t Count: Smarter Ways to Manage Costs.

Claims handling is a skill (and a stress reducer)

Loss events are stressful. Professional insurers—and brokers—bring claims expertise, bargaining power, and logistics support. Running your own “mini-insurer” demands time, skill, governance and discipline most people would rather invest elsewhere.

The hidden admin you’d have to run

Premium collection, investing the float, claim assessment, fraud/quality checks, and fair settlements—all of this is already baked into your premium with an external insurer.

Pricing isn’t one-size-fits-all

Assets carry different probabilities and severities of loss. A house may have a lower probability of loss than a car, but the impact of losing a house is far greater. Insurers use data to price that mix and then protect themselves with reinsurance. An individual can’t replicate that economically; trying to buy reinsurance privately is just paying for the very insurance you were avoiding.

The practical conclusion

Premiums reflect probability and exposure plus admin, distribution, and profit. Insurers win on scale, diversified risk, investment float, and reinsurance. Individuals (and even cash-rich firms) rarely match that combination. Formal insurance remains the practical, reliable way to guard against unpredictable loss.

Related learning & resources

If you want to strengthen the day-to-day financial judgement that sits alongside good risk decisions, these short, practical courses help:

• Budgeting and Cost Control — build and monitor budgets; ideal for sizing emergency funds vs. deductibles and planning cost control.
• Excel Financial Modelling Course — stress-test cash flow, reserves, and risk scenarios with robust models.
• Finance for Non-Financial Managers — read financial statements, price risk, and make confident calls without the jargon.

And for broader context on growing your financial judgement, you might also like: Adding Finance To Your Range of Competencies.

Risk and cost judgements like this one are exactly what finance training for managers and teams is built to sharpen. Ask John what would fit.

The false promise of cutting staff

The justification for reducing staff is a quaint gardening term of “getting rid of dead wood.” The analogy is to cut dead branches off the tree making way for new growth. The question no one answers is: Who killed the wood? In other words, how did your staff become “dead wood” in the first place?

Dead on arrival: recruitment gone wrong

There are only two possible ways. Either the staff you recruited were dead wood when you selected them, or they came in fresh, and died on your watch.

If it is the first – you seriously need to review your recruitment process, your recruitment staff, and the way you are seen in the employment market. If you have a bad reputation as an employer, you are attracting deadbeats and being forced to employ them for lack of choice.

This is where structured learning – from finance for non-financial managers to budgeting and cost control – can give you stronger managers and better decisions about who to hire and how to support them.

Killing the spark: culture, neglect, and poor leadership

Otherwise, your recruitment is fine. You attract great young people, well trained and highly motivated – just the sort of people you want. And then, pretty soon, through your company culture and persistent neglect, the spark dies.

This can happen through lack of training, absence of management attention, poor and inconsistent leadership or destructive office politics. It can arise through policies that lock people in (like soft loans from banks) so they have to keep their jobs long after they have stopped working – they lose all hope and ambition, all sense of worth, and they value themselves as low as the company values them.

At that point, the HR gardener prunes the “dead wood,” and soon goes about hiring the bright young shoots they hired before – and just as quickly, kills them off.

The smarter alternative: train, respect, and reward

The cost of replacement is always higher than the cost of maintaining staff. Poor company policies, isolated leadership and rigid pay scales, as well as segregating champions and drones, kills productivity.

Train your staff, recognize them all, reward them all and nourish their strengths. Here, practical learning – from business simulation exercises that build teamwork to financial modelling in Excel that sharpens real-world problem solving – creates sustainable performance.

That way the staff will reward the company.

The Self Help jargon quickly filters down into common parlance – silos, low-hanging fruit, quick wins – ‘and all those good things’ – (a dead give away phrase). T.S. Eliot called them ‘The Hollow Men’ (and women). In 1956 William H. Whyte published The Organization Man describing a shift from a culture that prized rugged individualism and entrepreneurial risk-taking toward one that rewarded conformity and loyalty to large organizations – the effect of Management Training.

The illusion of management skills

In the eighties a new dogma arose: don’t change the person, change the behaviour. The most horrifying example of this was the advice in a management textbook from an institution then held in high regard: ‘treat your employee as though you cared’.

There is plenty to learn about how to manage people, how to manage an organization – business or otherwise. But it all starts with being honest. Be honest in facing yourself. Be honest in facing the people around you, and your close relationships. And then you can teach people to recognize the true worth in every person with both strengths and weaknesses.

When training adds real value

This is why the best training is not about gimmicks or jargon, but about building understanding and capability. Courses such as finance for non-financial managers give people the confidence to engage with financial decisions without fear or pretence. The same is true of a well-designed business simulation: it works when it helps people experience the consequences of decisions in a safe environment, encouraging teamwork, honesty and respect.

These kinds of program succeed when they are rooted in reality — not when they’re treated as theatre.

Chris Vos, the CIA hostage negotiator, teaches many negotiation skills. At the core of all of them is honesty and respect for the other party.

Real leadership: honest, consistent and fair

And yes, do not try to change people – from who they really are. But do support them in returning to their lost selves. Who they really are is going to come out anyway, no matter how you try to control their behaviour. Leading by example, treating people with respect and dignity, recognizing and assisting their personal trauma, their strengths and their vulnerabilities.

This will make everyone into a manager of their own lives – and these are the people you want to work with in your company.

Every now and then, we come across a resource that makes us stop and say, “Yes — this is the good stuff.”

ExcelExercises.com is exactly that kind of find. It’s free. It’s practical. And it gets you doing things straight away — no fluff, no boring explainer videos, just real hands-on Excel work from the first minute.

Even better? You don’t need an Excel subscription. Everything runs right in your browser — which makes it easy, accessible, and ideal for jumping in wherever you are.

We at JSF are big believers in learning by doing. That’s the principle behind how we design and teach all our courses — whether it’s budgeting, financial modelling, or understanding finance for non-financial managers. So when we find a free tool that mirrors this mindset? We shout about it.

Why We Rate It

• It’s completely free
• No Excel software needed — all browser-based
• Offers 69 interactive, practical lessons
• Covers functions like XLOOKUP, COUNTIF, VLOOKUP, INDEX/MATCH, and more
• Lessons range from beginner to intermediate level
• Gamified: you can track scores, monitor progress, and revisit any lesson at any time
• You get your own dashboard to stay on top of your learning

One of our favourite things? You don’t have to follow the sequence. If you want to jump ahead to something specific — like a certain function or skill — you can. It’s flexible, and that makes it great for self-directed learning.

Example: Learning the COUNT function…

Who It’s Great For

If you work with spreadsheets even a little — and especially if you’re in finance — this is a gem. Whether you’re brand new to Excel or just need to sharpen your skills, this is a no-pressure way to level up.

Excel is always evolving. For example, XLOOKUP is now often used as a simpler and more powerful alternative to VLOOKUP. Sites like this help you stay current with those changes, not by telling you about them — but by letting you try them.

And it’s not just for individuals. Excel Exercises is also used and taught at universities like Berkeley, Cornell, McGill, and New York University. That’s a solid endorsement, and one we think speaks volumes.

Good Learning Doesn’t Have to Be Expensive

If you’re not quite ready to invest in a course — or your budget’s a bit tight this quarter — this is a great place to start. You’ll get solid, practical exposure to Excel in a way that builds your confidence quickly.

It’s not a full course, but it’s probably the next best thing — especially if you enjoy learning by doing rather than just watching.

Just Go Try It

This isn’t sponsored. No affiliate links. We just think it’s good — and we wanted to share it with you.

Visit ExcelExercises.com and start playing around. You’ll be surprised how much you can learn in just a few clicks.

What do you need to know to teach an old dog new tricks?

Some people say — “More than the dog.”

Wrong!

“Tricks the dog doesn’t know,” is the answer.

The old dog may know many things you do not know — in other fields. But if you know just one thing he doesn’t, you have something to teach. He may be an astrophysicist, but he still needs to learn to understand finance. It’s not automatic.

Good Education Is Continuing Education

A university degree, if it is a good one, will mainly have taught you how to learn for yourself. You will have a particular emphasis and have picked up content as well as a way of thinking for a specific discipline. But specialist training rapidly ages as knowledge continues to evolve. And by the very fact of being specialized, there must be other areas left out.

So good education is continuing education. It’s a good idea to continue by adding financial intelligence to your other competencies — especially if you’re in business, or leading teams, or navigating a changing industry.

If Finance Is One of the Tricks You Haven’t Learned…

…then it’s a trick worth learning.

You may have been running your business successfully for many years — and you may have missed many opportunities to improve your profit over those same years if you do not understand the finance of business.

You may rely on your Financial Manager completely — and this may be your undoing. You need to be able to evaluate the figures you are being shown and to have the business acumen to leverage opportunities that lay hidden. Or new ones that arise.

Knowing the Jargon Doesn’t Always Mean Knowing What’s Being Said

If you work in the corporate world and you have learned to navigate the jargon, perhaps you are still not sure of what people are actually saying — or confident to express your own view.

To progress, you need to be able to show that you know and understand what you are saying. Knowing how business works lets you make informed decisions, and knowledgeable contributions to financial analysis and management discussions.

Final Thought

If you are new to finance, Finance for Non-Financial Managers is the place to start to find out about business, money and accounting.

If you have had some exposure, best to make sure you really understand what these things mean, before continuing your journey.

Adding finance to your range of competencies is far easier with a structured four days than with self-study. Finance training for managers and teams sets out the options, or ask John where to start.

When it comes to managing costs, it’s easy to think that reducing headcount is the answer. Fewer people on the payroll feels like progress — but in reality, it can give a false sense of security.

The real focus should be on Total Cost to Company — not simply how many people are employed. Ask yourself: How much is your wage bill per department? You may find that two highly paid managers consume more of your budget than ten lower-level staff, while contributing less overall value.

Lessons from the Past

In the 1980s, International Computers Limited (ICL) issued a worldwide directive to cut headcount by 10%. Managers complied by dismissing the ladies who made and served tea, replacing them with machines. The problem? Those machines cost more than the staff ever had.

Similarly, IBM has been known to retrench employees, only to hire them back as consultants at a higher rate. On paper, headcount falls — but the cost to company actually rises, just hidden in different budget lines.

Why People Management Isn’t “Paint by Numbers”

You can’t manage people like a spreadsheet. Success comes from genuine engagement and creating a culture based on the three R’s: Recognition, Responsibility, and Reward. No matter how large your organisation, leadership’s influence is felt everywhere. As hostage negotiator Chris Vos puts it: “You have to be genuine.”

Want a quick exercise? Calculate the full cost to company (including salaries, office space, and incentives) of a five-hour meeting with 12 people. Then ask yourself: was the value created worth the cost? Often, the answer is revealing.

Budgeting for Better Management

The most effective approach is to give each department a set monetary budget and let the Department Head decide on staffing within that budget. This gives managers ownership and flexibility while ensuring that spending aligns with the work to be done.

The key is to work with your team to keep Cost to Company down while increasing Contribution to Company.

Want to Learn More?

If you’d like to go deeper into practical strategies for budgeting, resource allocation, and cost management, consider joining our budgeting course. This course is packed with real-world examples, interactive budgeting workshops, and proven methods to help you design an effective cost control course for your business or organisation.

If the people making head-count and cost-to-company calls are managers rather than accountants, that is a training gap worth closing as a group. See finance training for managers and teams, or ask John what would suit.

To control costs effectively, you first need to identify them accurately. A cost — or an expense — is anything whose value has been consumed or used up. Whether or not it helps the company achieve its goals, it is still a cost. And that’s the difference: costs are necessary; waste is not.

This is why budgeting and financial planning are essential tools in business. When you’re setting the annual budget, you’re not just forecasting spending — you’re creating an opportunity to eliminate waste and reallocate funds toward projects that will genuinely benefit the company.

Turn the Budget Into a Strategic Tool

A strong budgeting course will show that budgeting isn’t just an accounting exercise — it’s a decision-making tool. When done well, it forces you to ask: “Are we using our resources in the most effective way possible?”

Once the budget is approved, it shouldn’t be filed away and forgotten. Monitoring it regularly allows you to stay in control of both authorised spending and the progress of the projects those funds were meant to support. This kind of oversight is at the heart of any cost control course or practical budgeting workshop.

Efficiency Is the Smartest Way to Reduce Costs

The best way to reduce costs without compromising quality is by improving efficiency. In other words: doing more — and doing it better — with less.

That often starts with reviewing internal processes, updating your technology, and making sure equipment is reliable and well-maintained. These aren’t just support functions — they’re strategic levers that impact both cost and productivity.

It’s also where understanding the process of financial planning becomes critical. Planning isn’t just about tracking spend; it’s about making smarter choices in how resources are allocated.

Cost Control Needs People, Not Just Spreadsheets

Here’s something often overlooked: no spreadsheet or software can replace the impact of disciplined and motivated staff.

To cut costs and improve profit at the same time, you need the whole team on board. This is where communication becomes essential — not just pushing information down, but also listening to people’s concerns. It’s how you gain buy-in and build accountability throughout the organisation.

Whether you’re running a small business or managing a department in a large organisation, a successful budgeting course should reinforce that cost control is about people and processes — not just numbers.

Final Thought

Controlling costs starts with clarity — knowing what you’re spending, why, and whether it’s adding value. From there, it’s about managing efficiency, reducing waste, and engaging your team.

If you’re ready to sharpen your budgeting strategy and put smarter cost controls in place, our Cost Control Course can help you build a practical, people-focused approach that works.

Cost control lands harder when a whole management layer learns it together rather than one person at a time. Finance training for managers and teams covers how JSF runs group cohorts — ask John what would fit.

Profit is simple:

Revenue (or earnings) minus expenses.

To increase profit, you can either increase revenue or reduce expenses. On paper, both are equally valid. But in reality, most businesses find it much easier to control costs than to drive sales.

Why? Because costs are internal. You can manage them. You can make immediate decisions about spending, restructure teams, delay projects, or cancel subscriptions. You can reduce budgets. In extreme cases, you can even fire staff.

But you can’t force customers to buy your product. Revenue depends on external forces — the market, the economy, buyer perceptions, timing, competition. That makes it unpredictable. That makes it harder.

We Focus on Costs — Especially in Tough Times

That’s why, when budgets get tight or pressure mounts, most organisations focus first on cost control. And it makes sense — it’s what’s in your hands. It’s measurable, tangible, and usually the fastest path to improving profit margins.

This is why a structured hands-on budgeting course can help sharpen these internal levers — especially when delivered through budgeting workshops that are practical and industry-relevant.

But what often happens is this: we get good at cutting costs during difficult times… and then let them quietly creep back in when things get better. Spending increases gradually, unchecked, until we’re back where we started.

Controlling costs is important — it’s the baseline. It keeps the business efficient, lean, and sustainable. But cost control alone is not what drives long-term success. That requires something more.

The Real Driver of Success? Sales.

To truly maximise profit, we need to look beyond costs. We need to focus on the other side of the equation: revenue. And more specifically, how we generate it.

Success doesn’t come from cutting alone — it comes from the right mix of decisions around:

• Price – Are we charging what our product or service is worth?
• Volume – Are we reaching enough customers consistently?
• Quality – Are we delivering value that encourages repeat business and referrals?
• Marketing – Are we telling the right story to the right audience?

This is where budgeting and financial planning connect directly to your sales strategy. Understanding the types of financial planning and the process of financial planning helps ensure that cost-saving doesn’t undercut your growth potential.

Profit Requires Balance

Cost control is the minimum requirement. But if we want to build resilient, future-ready organisations, we need to do more than protect the bottom line. We need to actively grow the top line — with a budgeting course that doesn’t just trim expenses, but aligns them with strategic growth.

Otherwise, we’re only doing half the job.

Final Thought

Yes, you can cut your way to short-term gains. But true financial strength comes from balancing smart cost management with a deliberate focus on value creation. And that starts with the right training in both budgeting and financial planning.

If you’re ready to strengthen your approach to cost control while keeping sight of the bigger picture, our Budgeting and Cost Control Course is designed to help you do exactly that — practically, clearly, and confidently.

Cost decisions get better when the managers making them can read the numbers behind them. That is what finance training for managers and teams is for. Ask John what would suit your business.