Companies tend to give less attention to cost models when the economy is strong. However, you should always be focused on cost management – during prosperous or tumultuous times.
At Collective Insights, we help you identify and execute effective cost management strategies that impact your bottom line. These strategies include Continuous Capital Planning, Strategic Sourcing Analysis, Shared Services Opportunity Analysis, Current Project Review Analysis, and Balance Sheet Analysis.
Continuous Capital Planning
In this rapidly changing technological environment, the ability to make informed investment decisions is paramount. Continuous capital planning is a relatively new concept that aims to establish a single enterprise-wide investment portfolio. This enables:
- Greater visibility into investments for improved prioritization and tradeoffs
- Enhanced flexibility for real-time investment decisions in a dynamic environment
- Improved speed to market
- On-time, on-budget, in-scope project delivery
Imagine the ability to make real-time capital decisions using a defined selection criterion that effectively links your investment decisions to project planning, project delivery and your business strategy.
Strategic Sourcing Analysis
Companies operating in multiple locations may use a decentralized purchasing model. As a result, they often don’t take full advantage of volume discounts available from multi-national vendors. Moving to a centralized vendor purchase model can yield a material financial impact. Although, if not properly planned and executed, it can be disruptive to your processes and your employees may be slow to adopt.
Shared Services Opportunity Analysis
Shared services are typically undertaken when a business wants to consolidate support functions to better serve the company and its units. Theoretically, shared services operate as a business within a business, using a defined infrastructure to enable higher-value service delivery. They strive to achieve high service culture, efficient delivery model, best practices and metrics benchmarks. They also project significant process and service improvements, and long-term economies of scale. However, if the operating model design and implementation isn’t done properly, you’ll long for the good old days of the functional services model.
Current Project Review Analysis
Ideally, all projects are aligned with the strategy of the organization. Realistically, we know this isn’t always the case, leading to projects in direct conflict with each other, competing for the same resources, or projects that will essentially accomplish the same goal. And if you have a large organization, you may be overlooking opportunities within your cross-functional projects, leading to missed cost reduction opportunities and abandoned projects.
Balance Sheet Analysis
While balance sheet analysis isn’t a cost reduction technique, changes that impact the balance sheet can have a positive impact on cash flow and the overall health of an organization. For example, assume an organization with $1 billion in annual revenue has a day’s sales outstanding (DSO) of 45 days and a target DSO of 35 days. Reducing the DSO to the target frees up significant cash.
One of the largest expenses for companies is rent. Assessing your company’s real estate balance sheet will help organize assets and provide a clear view of what should stay – and what can go. During strong economic periods companies invest in premium office spaces and locations. There may be opportunities to combine locations, move to less expensive offices or lease rather than own. Reducing real estate costs frees up significant cash.
By comparing your company’s balance sheet ratios against competitors and similar industries, you will begin finding opportunities to free up cash and decrease risk.
The time to review and adjust your cost management strategies is now.
We’ve learned that the journey to generating effective cost management value is one of meticulous planning and detailed execution. Our experience allows us to identify and execute significant financial savings for our clients. We establish the right approach, starting with a defined, meaningful strategy. Then, we work side-by-side with you to execute and realize cost savings.
Learn more about how Collective Insights can be your partner in cost management.