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Cost Management:
Many businesses employ cost management plans for specific projects, as well as for the over-all business model. When applying it to a project, expected costs are calculated while the project is still in the planning period and are approved beforehand. During the project, all expenses are recorded and monitored to make sure they stay in line with the cost management plan. After the project is finished, the predicted costs and actual costs can be compared and analyzed, helping future cost management predictions and budgets.
Implementing a cost management structure for projects can help a business keep their over-all budget under control:
- Resource planning
- Cost estimating
- Cost budgeting
- Cost control
ME CFO can help you collect historical project data that can provide valuable analysis and project comparison to make critical business decisions, benchmark your estimates against your previous projects and improve your cost estimate significantly, extract metrics across projects to enhance future cost estimating accuracy, develop meaningful and interactive reports and export & import data easily from Excel.
Cost optimization:
Cost optimization is a business-focused, continuous discipline to drive spending and cost reduction, while maximizing business value.
Organizations may have exhausted the low-hanging fruit for saving money, but to be successful cost optimization should be a continuous exploration of technology that adds business value.
Check the current system of cost optimization against these 10 recommended focus areas:
- Digitalization of business processes
- Continuous improvement culture
- Customer self-service
- Improving business efficiency through analytics
- Improving data management
- Process automation
- Improving asset management
- Supply chain optimization
- Improving inventory management
- Business process outsourcing
ME CFO can help you go through your strategy for cost optimization and help you to streamline your strategy.
Cost cutting:
Cost cutting measures are typically implemented during times of financial distress for a company or during economic downturns. They can also be enacted if a company's management expects profitability issues in the future, where cost cutting can then become part of the business strategy.
It is important to classify costs into good costs, bad costs, and best costs.
Good costs focus on the company's growth and are aligned with the company's customers and how to meet the needs of those customers. Bad costs are those that do not match up with the company's growth strategy, and waste resources. When bad costs are cut, they can free up resources that can be used in a more productive capacity. Best costs are the costs associated with what makes a company unique, how it differentiates itself from the competition, and how it provides true value to its customers.
ME CFO can help you to implement a strategy and classify the good, the bad and the best costs without the risks of too much cost cutting.
Cost reduction:
The problem is that many cost optimization programs struggle to deliver or fail to stick.
The transformation starts by aligning cost to strategy – investing in differentiated areas and cutting back the rest. It’s important to understand what really adds value in your organization. You’re likely to find that a large proportion of spending is still being directed towards unnecessary tasks or on activities that can be performed much better, faster and more cost-effectively by doing them in different ways or by passing them on to others.
The below steps focus on optimizing rather than just cutting expenses to ensure your business can sustain competitive relevance and maximize its potential:
- Start with strategy
- Align costs to strategy
- Aim high
- Set direction and show leadership
- Create a culture of cost optimization
ME CFO take a detailed analytical approach focused on identifying the value generating potential within the business in a changing marketplace and differentiating the good and bad costs.
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