As an ex CFO, I always remember this time of year. Budget plans and strategies are being finalised and implemented for the next financial year, but one question always seemed to land on the CFO’s desk. What can we do about these indirect costs?? That is of course added to an already congested function (Finance), with limited available time, and to be honest, skills in this area.

Question: Is it a sensible focus of resources, there is a limit to how many projects the function can readily undertake. Surely the planned system upgrades, business function support, growth plans etc. should be given priority, where the effort to $ result ratios are much higher. Don’t sweat the small stuff!

Using the words of a CFO from of our clients:

“More CFO’s need to admit that they aren’t (and can’t be) experts at every single expense item in the Profit and Loss statement, and should bring in industry experts when required – particularly if they don’t charge if you don’t make a savings. CFO’s can get distracted; they are responsible for the finances of an entire organisation and in addition to that are generally working on 3 key projects that need to be implemented in that current financial year, so it is easy for the seemingly small stuff to be ignored”

As that CFO says, bring in the skills. We at Resources for Profit can help. In fact we guarantee the results. No benefit, no charges! We are the Resource to increase your organisations Profits.

We see a number of issues that need to be considered when focusing on non-staff indirect costs:

1. Does the organisation have the resources to both develop an understanding of where and why money is spent and whether best value is being obtained?
2. As is especially the case following recent mergers or acquisitions, supplier preferences can be quite subjective or even politically sensitive. This can often be observed in larger decentralised organisations also. It’s therefore desirable to ensure that any cost reduction project be handled objectively, with an independent third party often being the best course of action.
3. Can the process be streamlined? Supplier consolidation, streamlined invoice processes, simplified ordering, authority and payment process, all drive benefit. The difficulty is: who has the time to truly focus on delivering on those opportunities?
4. Are there new technologies to reduce or even eliminate costs (the demise of the fax or more currently, the traditional mail piece are perhaps good examples!). Change is rapid, but it’s increasingly difficult for organisations to keep abreast of the opportunities that might deliver benefit.
5. Sustainable benefit. How can opportunities be implemented in a permanent fashion? (we often find this to be the weakest link). It’s time consuming, and does need a clear focus. Other priorities often overtake the post implementation measurement, and the old ways drift back.

Solution: To truly drive the optimum sustainable result, there has to be focus. It’s difficult to treat this as simply another task for already busy staff. A dedicated resource, with clearly defined goals (perhaps incentivised on delivered benefit) is recommended. A broad range of market knowledge to cover the range of different costs involved, combined with the ability to drive change with demonstrable management support can deliver significant results. Our experience is that savings of 20% is not an unreasonable objective with the appropriate skills and focus.