Why Cost Control is More Important than Ever
Originally Published June 5, 2020 – Updated August 4, 2022.
With economic shocks growing more frequent and severe, businesses around the globe are confronted with uncertainty on a near-constant basis. 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, positioning them for growth whenever stability returns.
In a way, we’ve been here before. When the COVID-19 crisis began, CFOs immediately moved to control costs. In some industries, drastic cuts were necessary. For many others, it meant looking for areas to strategically control costs to reduce spend. And then we entered the new normal and began to expect adversity in fairly regular intervals, whether it showed up as supply chain disruptions, inflation or the fallout of geopolitical strife. More and more strategic finance leaders learned how to move out of crisis mode faster than before, focusing instead on enabling more comprehensive and nuanced cost-control policies and processes.
Apply lessons learned in cost control
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.
According to PwC’s Pulse Survey from January 2022, 53% of CFOs are planning to adjust pricing strategies to offset increasing labor and input costs as well as the rising cost of capital. At the same time, 49% of respondents aim to accelerate digital transformation initiatives to operate more efficiently and support top-line growth. These resilient leaders know that investing in cost-control capabilities plays a critical role in making these efforts successful.
But how do you know where to contain which costs — and where you need to maintain funding — when you don’t have the full picture of your cash, payments, financial obligations, and assets? This is where the smart, strategic management of business spend can really make a difference. By having visibility and control over your entire end-to-end spend management processes — from sourcing, to payments, to treasury and cash management — you can make real-time decisions to optimize your business, no matter what outside factors are at play.
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Approach cost control through Business Spend Management (BSM)
The practice of harnessing the power of spend comprehensively across your organization is what we call Business Spend Management (BSM). BSM starts with using technology to obtain a unified view of all the spend, cash, and liquidity in your organization. Along with this comes the capability and agility to make quick decisions while mitigating risks. When implemented properly, BSM allows you to make better choices about which suppliers you work with, what initiatives you invest in, and how nimble and effective your organization is.
A single investment in the advanced technology that powers BSM equips you to respond faster and more strategically to disruptions in profitability, cash flow, and growth:
1. Transform your spend culture
Finance teams are empowered to make smarter decisions with automated, efficient processes and visibility into and control over spend. BSM helps by:
- Introducing automated approvals before spend is committed (achieving 95% pre-approved spend)
- Enforcing budget checks on all purchases
- Creating visibility into all cost categories across your entire business (such as marketing-related costs, spend on subscriptions, and spend on SaaS products)
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2. Extend your runway for growth
Finance teams require visibility into liquidity and cash flow. They should also be in a stronger position to negotiate supplier contracts and optimize payments for more favorable terms. BSM helps by:
- Enabling digital payments with added controls, float, and rebate opportunities
- Establishing 100% visibility into the cash position with a few clicks
- Running analyses against actuals, forecasts, or budgets across business, region, category, and more
3. Do more with less
Finance organizations need to scale with discipline and drive efficiency. Resources should focus on keeping the business on-budget and closing the books faster to meet financial goals. BSM helps by:
- Maximizing FTE productivity in invoicing and AP
- Eliminating manual work for AP (such as achieving a first-time match rate of 87%)
- Automating workflows throughout purchasing, approvals, invoicing, and payments
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