As more CFOs are counted on to add strategic insight, they shouldn’t forget a core part of that role: cost management.
Cost management goes beyond simply trying to spend less; multiple strategies can be applied to a robust cost management approach. In principle, CFOs are embracing those strategies, but a gap exists between plans and action in the coming year, Accenture said in a new survey report.
And research has shown that cost management practices are vexing some companies. A recent survey by the Chartered Institute of Management Accountants said that UK businesses wasted £194 billion ($275 billion) because of poor cost management practices.
On one hand, cost management is important to finance chiefs – in the Accenture survey of 214 CFOs, 56% have strategic cost management performance objectives. But just 6% of finance chiefs say that cost management will be their top strategic priority in 2016.
Cost management is about more than finding cheaper ways to do the same tasks. Especially in a digital world, cost management means making technology a top priority. Putting technology to good use has helped some companies shave as much as 80% off costs, according to Accenture’s report.
Another reason to be vigilant in cost management practices, according to Accenture: By taking the actions that potential acquirers or activist investors might do themselves, companies can fend off buyouts or hostile takeovers.
One way CFOs are pursuing strategic cost management is through mobility. Many workers don’t need traditional office space to perform their jobs, and 54% of CFOs say they’re taking that mobility path.
Moving technology to the cloud (52%) and the use of robotics (44%) are other ways finance chiefs say they’ll pursue strategic cost management in the next three years.
For finance professionals, assessing what kind of cost manager they are can be an important first step. Another key step is placing emphasis on being a partner in cost management, according to Kathy Lockhart, CPA, CGMA, the controller and vice president of finance at Noodles & Co., a US restaurant chain.
By helping departments examine processes and then making recommendations, finance can achieve better cost management. A conversation about recommendations could start this way, Lockhart said:
“Here’s a way that we can save money. Here’s a way that we can be more efficient … but we’re your partner in this. We’re not just telling you what to do. I want to understand what you’re doing, and then I’m going to be able to help you more.”
Related CGMA Magazine content:
“How CFOs Can Support the Transition to a Digital Business Model”: Research by EY suggests that many finance leaders underestimate the significance that the shift to a digital business model will have for their organisation in the near future.
—Neil Amato (email@example.com) is a CGMA Magazine senior editor.