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Cost Reduction is definitely Not Cost Management…

By 23rd October 2015No Comments

microscope02-300x260Established in 1994, Auditel is the UK’s leading provider of strategic cost management, with over 200 consultants serving more than 3,000 clients. In 2012, Auditel commissioned a survey with leading business publication Management Today. They were keen to see how cost management is viewed in today’s economic environment and over 120 business leaders responded.

Commenting on the results, Managing Director Chris Allison says: ‘The research found that there is a genuine lack of understanding in organisations between simple cost cutting exercises and strategic cost management. Cost reduction is just part of the process; you need a strategy in place to make sure that you carry on monitoring those costs on a regular basis. You need the right people, tools, knowledge and processes.’

He added: ‘Most organisations don’t have the tools to benchmark costs accurately and then monitor them after implementing cost savings. In fact, less than 2% of the survey respondents claim to track costs or have an on-going programme. Focussing purely on cost reduction means that you may get savings initially, but if these are not monitored, after some time, price increases may creep in. KPMG has suggested in a recent survey that 95% of cost reduction exercises fail and costs come flooding back. All their hard work comes to no avail.

‘By contrast, cost management is part of a long-term process which means getting the most out of your resources and is part of an overall strategy.’

‘Here is an example of one of our projects.’

Anglia Factors

Suffolk-based Anglia Factors has offered bespoke and quality craftsmanship in custom-built kitchens, bedrooms, bathrooms, and home offices for over 40 years.

In 2002, Managing Director Dan Barr, was painfully aware that he probably wasn’t getting the best possible deals on utilities and telecoms, but was simply too busy to investigate them properly himself. However, he was keen to find an independent cost management company that could do the work for him.

Mr Barr continues: ‘Since then, they’ve simply managed my energy and telecoms without a hitch I am able to get on with building my business, while still being in control of who supplies us, and on what terms. Since 2002, they’ve saved us tens of thousands of pounds, but as a hectic MD, it’s the time I’ve had released back to me that I notice the most. If you run a business I’d definitely suggest having a conversation with them!’

Chris adds: ‘Over the past 20 years, Auditel have worked with thousands of firms. We can say with some certainty that strategic cost management driven by the people, tools, knowledge and processes can deliver much greater returns than in-house resource alone.

‘You may think that you’ve got all your essential business costs under control but just to make sure, why not book one of our Business Health Checks?’