As senior executives face more pressure to respond to rising costs and eroding profit margins, CFOs can remind their colleagues that they have more cost-optimization strategies than they might expect.
Many business leaders reflexively reach for the headcount-reduction lever. This is understandable given the rising cost of labor and that downsizing and reducing year-end bonuses usually hits the bottom line relatively quickly. But headcount reductions also can limit an organization’s ability to generate more revenue while impeding the company’s race to resume growth once the economic cycle turns.
Finance leaders should underscore the need to analyze all implications of a cost-optimization decision while ensuring that a wider range of cost-optimization options are evaluated. Business process reengineering often accompanies the implementation of new automation. This work removes process inefficiencies and helps reduce process redundancies and cost. Two other cost optimization focal points — new operating models and zero-based forecasting — deliver similar benefits. All three of these activities typically require more planning, time and effort compared to technology cost containment, procurement spend analyses and the implementation of new technology tools.
Check out these KLplus CPE courses related to cost management:
- Cost Accounting Module 1: Cost Terms, Concepts and Classifications (KLplus CPE Course): This basic-level online tutorial is designed to provide you with a working knowledge of the terms and concepts you will need for the more advanced topics covered in later modules.
- Cost Accounting Module 2: Job Order Costing (KLplus CPE Course): This basic-level online tutorial introduces the job order costing system and process and discusses how costs for inventory, materials, labor and overhead are captured and applied to jobs.
- Cost Accounting Module 3: Cost-Volume-Profit and Activity-Based Costing (KLplus CPE Course): This basic-level online tutorial covers cost accounting concepts related to the study of the relationships between costs and volume and their effect on profit.
- Cost Accounting Module 4: Standard Costing (KLplus CPE Course): This basic-level online tutorial covers standard costs and how they are used by management to control operations.
- Cost Accounting Module 5: Flexible Budgets and Overhead Analysis (KLplus CPE Course): This basic-level online tutorial covers flexible budgets and overhead analysis and how they are used by management to control operations.
- Cost Accounting Module 6: Relevant Costs for Decision-Making (KLplus CPE Course): This basic-level online tutorial covers the decision-making process that businesses go through and the costs associated with those decisions.