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‘70% of organisations do not have a cost management strategy in place…’ Is yours one of those 70%?

By 14th April 2016No Comments

microscope02-300x260Auditel is the UK and Ireland’s foremost strategic cost management consultancy. They undertook extensive research in this crucial topic through the influential business publication Management Today. This gathered a response from over 120 business leaders, which indicated that 70% of organisations do not have a cost management strategy in place.

Commenting on the research, Auditel’s Managing Director, Chris Allison, said: “Auditel commissioned this survey as we were keen to see how cost management is viewed in today’s economic environment. The answers have revealed that businesses and organisations did not embrace strategic cost management as well as they might have done. There is a genuine lack of understanding between simple cost cutting exercises and strategic cost management.

“Most organisations do not have the sophisticated analytical tools to benchmark costs accurately and 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. As suggested in a recent KMPG survey, 95% of cost reduction exercises fail and costs come flooding back.

“Over the past 20 years Auditel has worked with more than 5,000 businesses. We can say with some certainty that strategic cost management driven by the right people, with the right tools and knowledge, can deliver much greater returns than in-house resources alone. Almost three quarters of the respondents control their cost management in-house, yet experience suggests that they are ill equipped to deal with the task.”

Here is a case study taken from one of Auditel’s many clients:

logoNorman Hay plc is the world leader in the design, development and application of innovative surface treatment products and processes. With more than 70 years’ trading history, the group operates in over 25 countries.

Group Finance Director, Nick Ogden, tells the story. “We were a diverse group with no centralised purchasing function. With the assistance of Auditel, we initially looked at those areas where there was commonality of spend across the Group, to see whether there were savings to be obtained from buying in greater volumes.”

For this assignment, Auditel appointed a team with expertise in several cost areas, with the following results:

  • Head Office savings were achieved on Fixed Communications (15%), Mobiles (23%) and Stationery (12%).
  • Group savings, over the last four years, have also been achieved on Fixed Communications, Mobiles, Stationery (with a 34% saving) and Water. (12%).
  • Freight and Logistics; Travel and other Business Supplies and Services are currently being reviewed.

The team leader adds: “Norman Hay had clearly kept a very close watch on their costs in all areas of the business. But we were able to offer added value with Auditel’s core strengths: time to focus on the detail, sophisticated analytical tools, expert market and technical knowledge and effective buying power across multiple companies and locations.”

Ongoing management

A key part of Auditel’s role is to ensure that savings and best value continue to be achieved and are examined on a regular basis. The supply of management information, review of invoices, contracts, industry changes and maintenance of strong supplier relationships are essential for the client’s peace of mind.

Nick Ogden concludes: “Auditel are very proactive. The combination of their people, tools, knowledge and strategic cost management process is highly valued. Auditel have helped us to generate significant savings and this is fully appreciated by all the Norman Hay Group staff who work with them.

Chris Allison adds: “So, if you believe that your business may be ‘one of those 70%’, Auditel can offer everything you need to put your cost management strategy in place. This will lead to improved efficiencies, accelerated performance and will help you to gain a competitive advantage in your field. Book a consultation and enjoy the tangible benefits and peace of mind that Auditel’s highly effective cost management services can deliver.”