Why Cost Control is More Important than Ever
After years of steady economic growth, businesses around the globe are confronted with uncertainty. The challenge for finance leaders today is to make the right decisions and changes that will enable their companies to become more resilient and thrive as we adjust to the new normal.
When the COVID-19 crisis began months ago, CFOs immediately moved to control costs. In some industries drastic cuts were necessary, including furloughs, to preserve cash. But for many others, it meant looking for areas to strategically control costs to reduce spend.
Getting control of business costs
Cost control has always been important, but, in times of good economic health, growing revenues and planning investments for growth were the top business priorities. Today, with revenue growth stilted in many industries, controlling costs is more important than ever.
While the phase of immediate cost cutting in response to the virus’ short-term economic impacts has passed, cost containment remains a top priority for finance leaders. Eighty percent of respondents to PwC’s COVID-19 CFO Pulse Survey noted that they would implement additional cost-containment measures before the end of May. While that’s down six percent from April, it remains a key objective, and we expect it will continue to be one for some time.
Control, manage and optimize addressable spend
In today’s environment, a dollar saved is worth more than a dollar earned. In order to regain control over their business’s bottom line, strategic finance leaders are focusing on enabling more comprehensive and nuanced cost-control policies and processes. These resilient leaders know that whatever may come, investing in cost-control capabilities will pay big dividends, short-term and long-term, and ultimately enable their business to thrive when the economy recovers.
Looking for quick ways to contain costs? Get our cost control tips list: 10 quick steps you can take to get immediate visibility and control of your spend.
Be strategic and judicious: Cut with a scalpel, not an ax
It’s important to be cautious in making decisions of where to cut costs. While large and quick cuts may be necessary, there are many areas of waste that can be reduced across a company’s addressable spend. It is difficult to do this effectively without a system in place that provides full visibility of all business spend.
Start by getting all of your spend under management and then look to areas where you have opportunities to reduce costs. This can be enforcing existing cost-control policies across your organization or renegotiating contracts and reducing your tail suppliers so you are able to secure better rates with fewer vendors.
A comprehensive Business Spend Management (BSM) platform like Coupa makes this possible by controlling costs across all elements of spend, from sourcing and procurement to contracts to payments.