Cost management is a top priority for many finance professionals, yet these professionals often struggle to help a company get the most out of its investments. In some instances, finance professionals fail to analyze data to understand how an investment will impact a company in the foreseeable future. Or, finance professionals may operate in silos – something that may cause these professionals to miss out on extensive insights into potential business growth opportunities.
Allergan Associate Vice President of Finance Larry Bitton offered insights into cost management during his keynote presentation to Argyle’s CFO membership at the 2018 Financial Leadership Forum in Los Angeles on May 22. In his presentation, “Effective Cost Management,” Bitton provided tips to help finance professionals streamline their day-to-day cost management activities.
A top-down approach to cost management can make a world of difference for a company. If finance professionals collaborate with business leaders, a company may be able to identify growth opportunities and budget accordingly.
Finance professionals are responsible for getting business leaders involved in cost management. If finance professionals teach business leaders about cost management and its impact on a company, a business can incorporate cost management into all aspects of its everyday decisions.
Cost management includes decisions regarding the timing and amount of investments. Also, costs play a key role in the long-term strategy of the company. And if a business cannot manage its costs properly, it may suffer the consequences of poor decision-making for years to come.
Finance leadership needs to play an important role within a business. If finance professionals review and approve business expenses based on their short- and long-term impact, they may be able to help a company make the best-possible decisions. Thus, finance professionals can become valuable contributors within a business, as they will be able to help a company optimize the value of its investments.
In addition, finance professionals should not dictate investment decisions. Finance professionals instead should work with business leaders who understand the market conditions and have a clear vision for a company. That way, finance professionals can help these business leaders drive a company’s long-term growth.
Although many finance professionals outsource different aspects of cost management, it is vital to have a plan in place for outsourcing. If finance professionals understand the value that consultants provide to a business, they can determine precisely how much to invest in these consultants. Therefore, finance professionals can avoid committing significant time and resources to hire consultants who deliver limited return on investment (ROI).
Finance professionals should strategize as much as possible. With a data-driven approach, finance professionals can analyze a wide array of information to make informed cost management decisions. Then, finance professionals can craft budgets and strategies based on meaningful business insights.
“We want to play a supportive role, but we also want to be thoughtful and have a strategy for why we’re going to invest how we invest,” Bitton indicated.
In terms of mergers and acquisitions, finance professionals must maintain open communication with all stakeholders involved in a transaction. A merger or acquisition may result in substantial changes for a company, its current employees and its new staff. If finance professionals obtain input from all parties involved in an acquisition, they can do everything possible to ensure all stakeholders are fully supported throughout the transaction. As a result, finance professionals can minimize the risk of problems during a merger or acquisition.
“You need to be inclusive,” Bitton noted. “You need to make sure you have the input part of the decision-making process and explain why your company is doing the things it does.”
Finance professionals should maintain flexibility, too. If finance professionals are open to budget modifications, they can ensure a company has the funds available if new growth opportunities become available. This flexibility may help a business capitalize on unparalleled growth opportunities, and ultimately, enable the company to stay ahead of its competitors.
“Have flexibility in your budget,” Bitton recommended. “It’s important to have a contingency to start and have flexibility in your plan so you can support the changing dynamic of your business.”
Cost management is a major challenge for finance professionals, but those who can balance a company’s short- and long-term goals can help a business effective control its expenses. These professionals will help business leaders understand the immediate and long-lasting ramifications of decisions and ensure that they account for myriad factors throughout the decision-making process. As such, finance professionals can provide business leaders with the support they need to help a company make the best-possible investments.