Getting a cost management focus at every level of the organisation – it’s relatively painless and easy to do.

Most people think that a profit issue is an accounting problem.  But in reality it’s not.
It’s a supply-chain, budget management and activity management issue.  It’s also a knowledge gap issue.  Most people are not aware that they directly influence cost and profit. They do this by the hundreds of actions that they take and decisions they make every day, regardless of their role.
If you work for a commercially focused, for-profit organisation, it is highly likely that you influence cost without consciously thinking about it.  

Whilst finance and accounting may not be your primary role, you can help contribute to the organisations overall profitability.  How? By looking for and stopping profit leaks. Watching for profit leaks means controlling costs.
Without constant vigilance costs can grow. Some costs, being less visible than others, means they get overlooked.  Things like double handling, excessive inventory and increasing overheads. You get the picture.

Example:

So I thought I would share my experience with getting a focus on cost management at every level of the organisation in a way that is painless and easy to do.
Many years ago I worked for a large manufacturing organisation that had been in existence for over a hundred years.  It was a great organisation to work for. It had a great team of people and a can-do culture. At the time the economy was in a downturn and cash was tight. There was a microscopic focus on costs. Every employee was asked for their opinion on how costs could be better managed.
We ran a cost exploration exercise and looked at every cost and where the cost bucket leaks were happening. To visualise the impact we drew a bucket with revenue going in and cost leaks going out.
Process and operational change was made as a result of the suggestions and feedback from everyone within the business. At the end of each month there was a postmortem on profit and loss statements for every department, division and business. You will be pleased to know the results were positive and sustainable. The rituals of that manufacturing organisation over time have become legend and came to mind last week when I was helping a management team with cost management.
The moral of the story – every additional revenue dollar that goes into the bucket is good, but getting everyone to optimise costs to reduce profitability leaks is smart.
 
What are your top 3 cost challenges?
 

About the Author Jackie O’dowd: Jackie delivers improved business performance. She is the creator of the realising success Framework, and author of ‘Connecting The Dots – The Blueprint For Strategically Aligned Business Performance’. Jackie helps organisations to solve problems and improve organisational capability and performance. With extensive experience across multiple industry sectors; Petroleum, Manufacturing, Health, Civil & Mining Services, Employment Services, ICT, Oil & Gas, Government and Professional Services, her results speak for themselves. Jackie works with organisations that want to realise their potential and get real sustainable results. Connect with her on LinkedIn.