FP&A Trends: Managing Fixed Costs During Uncertainty

When looking to reduce fixed costs, Karnawat suggests investigating these expense categories:

• Payroll and benefits
• Supplier relationships
• Outsourcing
• Cost of operations and value creation
• Culture

Read more at FP&A Trends >

RCA Institute: How Do You Prefer Your Costs – Fixed or Variable?

The RCA Institute asks the following questions about fixed or variable costs – Are they avoidable for the current decision? And, what’s my market risk and tolerance?

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Aligning FP&A and Accounting Teams for Success

“Accounting teams, which are responsible for controls, compliance and reporting — traditionally backwards-looking functions — tend to focus on the balance sheet, while financial planning and analysis (FP&A) teams, which are responsible for forward-looking budgeting and forecasts, tend to focus on the P&L. FP&A teams typically account for a transaction one way — as an investment, for example — while the accounting team accounts for it as an expense.”

Read more at CFODive.com >

Industrial Companies: Control Indirect Costs to Gain Profits

“Maintaining profits and growth is going to be very difficult. However, regardless of the larger economic environment, companies can take actions that can help. Specifically, many companies are seeing the share of general and administrative (G&A) costs increase. From 2008 to 2015, G&A expenses grew more slowly than revenues (41.8 percent versus 61 percent). Since then, the trend has reversed, with G&A expenses rising faster—15.4 percent compared with 6.0 percent revenue growth. Traditional cost-optimization approaches are yielding diminishing returns; if revenues begin to fall, then, so will profits.”

Read more at McKinsey Digital >

The 3 Most Common Profit-Killing Mistakes to Avoid

According to Gartner, just three types of financial decision-making mistakes can cost businesses around 3% of their net profit. Operational decisions are increasing in speed, volume and complexity — creating a challenge for finance, whose job it is to make sure those decisions are financially sound. Many finance teams have invested in different tools and technologies to improve their decision-making capabilities, however, few are successful at consistently supporting business decisions in a way that delivers tangible business value. To change this, finance leaders must stop making the following profit killing mistakes: confusing a desired outcome with the likely outcome, overlooking a decision’s effects on other parts of the company, and having an “any business is good business” mindset.

Read More at Smarter with Gartner >

Creating A Sustainable Business Model for The Future

Dynamics within a business are constantly changing – from their customers and business models to their cost drivers and profit margins – nothing ever stays the same. In order for a business to grow and continue to be profitable, new processes must be able to take root.  The challenge for many business leaders understanding their costs and profits and how they relate to planning, performance, and sustainable growth. This is where creating a sustainable business model, or a “profit by design” methodology comes in. The heart of “profit by design” is a focus on profits, managing margins and understanding cash flow to gain a solid understanding of how much it will cost the business to operate now and in the future. With an understanding of a company’s finances, leaders and team members are better able to plan their budgets, forecast their needs, manage cash and positively influence the financial performance of the company, as for control these there are services of accounting firms in Charlotte NC which can help you in this area. And if you are looking for ways to manage your prepaid account with ease, then you may check out Myprepaidcenter for more info. Click here for additional info.

Be transparent with your team, and encourage financial literacy.

According to brands like Mongan, the core challenge with profit by design is about making sure your company is testing all assumptions on a regular basis and sharing this information within the business. At the leadership level, continually review how the company competes on price, technical superiority or customer loyalty. Running a business isn’t just about profits and growth; it’s about safeguarding its future. It’s vital to consider potential pitfalls and how to address them. In my experience, https://www.tradex.com/motor-trade-insurance was a lifeline when unexpected issues arose. Such specialist insurances provide peace of mind.

As well, ensure your employees have a basic understanding of how their job helps the company make (and keep) its financial stability. Get employee insight started by instilling financial literacy in your team, and help them understand the difference between profit and cash flow. For more in-depth insights into financial literacy and investment strategies, consider exploring Kiana Danial’s Invest Diva review. Additionally, address the enduring challenges of workplace bias to foster an inclusive and supportive environment. Transparency is crucial in reassuring employees that the company is stable. Business leaders may use an employees management system to keep track of their workers’ attendance and productivity.

I’ve found that the ways in which information is distributed throughout the company affect profits and costs. The easier it is for people in the organization to get access to essential information, the easier it is for them to succeed and make the company more profitable. Financial transparency is about sharing revenue, profit and projected sales with everyone in the company. In my experience, this knowledge, when coupled with employee key results, enhances accountability, increases understanding in how a business operates and makes everyone a stakeholder. In the realm of enhancing communication and transparency within a company, even small details like business cards can play a role. Metal Business Kards serve as a direct connection point for employees to reach out to one another, fostering easier information exchange and collaboration. They symbolize the openness and accessibility that an organization encourages, aligning with the principles of financial transparency and a shared sense of ownership among stakeholders.

Read More at Forbes Magazine >

What Sets Modern Finance Teams Apart from The Competition?

What sets modern finance teams apart from their competition? The short answer: their cost management methodology.

“Using cost management as a strategic lever, as opposed to a defensive response, creates new opportunities. It is no longer a reactive tool. It is a proactive way to become more competitive in the global environment.”

Modern finance leaders have transformed not only the way they view their costs, but also how their costs operate within their overall finance strategy. The biggest difference between finance teams with this viewpoint and those that are still struggling to understand their cost is that they are using new technologies and thinking outside the box. They use new tools, new techniques, completely new cost structures that not only reduce costs, but also free up money for growth.

Read More at Knowledge @ Wharton >

Cost Management Isn’t Only About Costs

“Not long ago, companies thought cost management was about reducing expenses. The notion then evolved and was viewed as a way to manage costs while also driving growth. Now, cost management is advancing further. Business leaders see it as a strategic initiative that is part of a larger transformation process.”

Modern businesses’ focus on cost management has shifted from cost reduction to cost transformation. The cost-to-transform method is about managing cost structures along with revenue growth and changing product and services offerings, all while focusing on growth. In this “save to transform” mode that many businesses are in, technology is making a huge play.

Read More at Knowledge @ Wharton >

Cost Management: The Key to Sustainable Profitability

“Companies that achieve “efficient growth” focus on building scale, not scope, into their cost structures.”

Controlling costs is not a new priority for modern CFOs, but today’s competitive pressures have finance leaders determined to translate their long-term growth plans to sustainable profitability. Finance leaders today distinguish themselves by the cost management practices they implement in their organization, because those decisions can have a tangible impact on shareholder returns and build the foundation for profitable growth.  However, most CFOs are struggling to create the conditions for efficient growth due to widespread missteps in their cost management practices. Companies that successfully grow their top line while reducing costs focus on building and reinforcing the necessary scale in the cost structure to secure long-term profitable growth.

Read More at Smarter with Gartner >