How to make Expense Management your strategy

Always be internally-driven: Keep improving your process. Have a good employee suggestions program that works, that is, all suggestions are carefully evaluated and those that are implementable are actually implemented, and if they work out well, the employee is suitably rewarded.

Always be externally-driven: Stay on top of changes in technology and process. Even when a technology is not directly targeted at your application/process, you need to evaluate it to see if you can use it for cost reduction.

Competitor-driven: Benchmarking against your competitors is ideal. You must have real time data on your competitors’ cost position. If you find that your competitor is doing better than you, immediate action is needed.

Always be Implementing a cost reduction program: After you have compiled the data from competitors and other industry benchmarks, set realistic goals first, though it is perfectly fine to have ultimate goals as well. Ruthless cost cutting can have negative consequences.

Develop a cost reduction program in consultation with each and every employee who could potentially contribute. Do not limit the team to managerial types. In many cases, the floor staff has a better understanding of what works and doesn’t and how to make the process better.

Always do a ROI analysis. No cost reduction program should be undertaken until the ROI justifies it.

Explore all options for cost reductions and not just those related to business process redesign or technology/equipment upgrades. Some of the other options that can be considered are outsourcing or off-shoring.

Business process redesign – A simple framework for small and medium-sized businesses While growth is a preferred mode of creating value in almost all cases, an enterprise still needs to focus on operations management, or more specifically, on the robustness of its business processes. Business processes, therefore, may need to be redesigned from time to time for the following reasons:

1.Existing process are broken, or in other words, performing at sub-optimal levels

2.New technology/equipment/systems are available

3.Competitors have better business processes putting you at a competitive disadvantage

4.Business model transformation is being implemented

5.Customers expect you to align your processes with theirs

While business process redesign (or reengineering or revamping or overhaul) may initially seem overwhelming, it shouldn’t be. In fact, most businesses should be able to do a large part of BPR on their own. We believe that no one knows an enterprise’s processes better than their own employees. However, there are areas where an external advisor can create value:

1. Employees are often reluctant to identify broken systems, inefficiencies, errors, etc. because it is likely to make them look bad

2. Consultants and advisors, through their work with other companies, have a better

3. understanding of what works and what doesn’t. Thus, by tapping into their knowledge base, you can not only save time and money, you are also ensuring that you are using the best practices available in the industry. They also have better idea about benchmarks and may, therefore, help you set realistic expectations from BPR

When an organization decides to outsource, reducing costs is always one of its main objectives. Then ‘reducing’ costs evolved into the need to ‘control’ them. And today, the financial aspects are often not even listed among the key points. It’s true that cutting costs remains an important factor, but rather as a consequence of the main requirements: nowadays when an organization embarks on an outsourcing project, it is looking above all to safeguard its operation (thanks to state-of-the-art Data Centers, industrialized processes and formal, guaranteed levels of service), to make sure it has easy access to the expertise it needs to manage complexity within its information systems, to access technological innovations more quickly and to be in a position to respond to fast-changing business practices.

What customers presented to their service providers followed quite a simple formula: “do the same thing, but better, faster and at a lower cost”. At that time, outsourcing often consisted very largely of taking over existing systems. But for the past five years, IT Departments have had to face a dual, and clear-cut acceleration: within business itself on the one hand, which has led their internal customers to expect their information systems to be much more responsive.

And, on the other hand, on the technological front, especially with Web technologies now reaching maturity (including those operating at back office level) and the growth in consolidation and virtualization.

Today’s outsourcing contracts take this change into account and as a result they are including much more development work rather than simply operational tasks. Which is why costs no longer take center stage in the list of requirements for the contract: before doing things in a less costly way, you have to start by actually doing it in the first place!
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