CFOs: 3 Ideas That Will Help You Reduce Cost Before 2016


22 Sep CFOs: 3 Ideas That Will Help You Reduce Cost Before 2016

Cost Reduction

One major take-away for CFOs in the past years is that it pays to be pro-active towards cost reduction and control. Getting there often takes a large planning effort. Here are 3 cost reduction ideas that require little planning and can impact the EBITDA before 2016.

During the economic downturn of the past 5 years many corporations have attempted to get leaner and reduce costs. Fortunately, the economic outlook is a lot brighter now with America’s and European economies growing. For many CFOs the big takeaway from this recession is that another economic downturn might just be around the corner. It pays to be prepared for tough times, that’s why many corporations continue to run cost reduction programs to become lean.

In the past, cost reduction programs were mostly large transformational programs that adjusted a corporation to economic reality, commonly in a big shock. These programs were typically management- (consultant-) driven, focused on high-level savings and involve FTE-reductions.

The entire organization is affected and needs to mobilized for the cost reduction effort, which is one of the major reasons why cost reduction programs often span multiple years. Also enterprise-wide planning is involved because cost reduction focus on high-level areas and touches one the core- and key areas of business: people. Internal project teams or external consultants are hired to identify and execute major cost savings.

With the current CFO toolbox (consultants, internal project teams, lean / six sigma product cost optimization) for cost reduction there doesn’t seem to be a solution that allows for sustainable cost savings in the short term. Since the focus has traditionally been on the big picture and associated marginal cost of the CFO’s toolbox are high, incremental cost savings ideas (the long tail of cost reduction) are simply not worth to act on. We’re talking about ideas with a savings worth ranging between €1K – €100K.

The longtail is large, and thousands of ideas add up to big savings. The CFO will need to leverage the collective brainpower of the workforce to identify & unlock these types of  savings.

With 2016 budgeting discussions impending, here are 3 incremental cost savings that will impact the bottom line by the end of 2015.

1. Software (€100K*)

 

Software licenses are commonly purchased in bulk, resulting in unused licenses. Usedsoft.com allows corporations to resell their unused software licenses on their marketplaces. It can come in handy to buy secondhand licenses as well.

2. Travel (€50K*)

 

Broaden the hotel and accomodation mix for company representatives. Encourage reps to use AirBnB to find accommodation for travel or to stay at friends & family (provided the company has an allowance for a reimbursement gift or a company diner).

3. Review subscriptions (€1K*)

 

Have a secretary check if newspapers and magazines are being read by your personnel. If not, cancel the appropriate subscriptions.

These are just 3 incremental cost savings that don’t disrupt the on-going business, unlike a typical cost reduction project. At Treeveo we’ve seen significant savings in the cost reduction long tail, even for companies that went through 7 consecutive years of traditional cost savings programs. Our database of initiatives currently boasts 150+ cost savings initiatives and growing.

Like this post if you think the suggestions could help you save costs. Comment to share your thoughts and if you want to share other smart, non-disruptive ways to reduce costs.

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*Savings estimation are based on corporations with OPEX of €20M – €200M.

Photo credits Krzysztof Puszczyński

Reyndert Coppelmans
reyndert@treeveo.com
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