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Header Find Hidden Profits

Practitioners are faced with increasing challenges due to the volatile market and uncertainties in the global market. Flatter corporate structures, global competition, overcapacity, downsizing, and changing business environments have placed enormous demands on managers. Hence it is crucial for any organisation to control costs and quantify resources efficiently.
“30 % of a company’s business by any measure (accounts, products, transactions) is unprofitable”. (Jonathan Byrnes published by Harvard Business Review in 2006)
Much research has been done before and since, but little has changed.

  • Very, very few companies focus on improving profitability of the existing business.
  • Many focus solely on revenue growth, for instance spending millions on acquiring new businesses with insufficient knowledge of expected profitability.
  • Most companies understand gross margin, but few understand the drivers (causes) of cost below gross margin (often classified as overheads) and their effect on product/customer profit contribution.
  • In high tech and service businesses as much as 90% of the cost base can be reported as “overheads”. Few companies systematically analyse overheads to identify and eliminate wasteful processes or highlight unprofitable customers and products. There have been numerous successful projects and case studies that prove that as much as 80% of profit is made by 20% of the customers. Accountants and controllers should be systematically reporting metrics that are vital to decision making, such as cost to serve a customer, or lifetime product profitability.

The annual budgeting process normally requires enormous effort by every department in the company, but is consistently derided as useless if not damaging. Budgets are often too detailed and approved after key decisions have been made. In many companies they are a “game” played once a year. Companies need more agility than this. They need regularly updated forecasts to the planning horizon.
In Zenith’s 2 day workshop, Steve Benham, BA FCA, will share his vision that CFOs need increased focus on profitability. Being a leading profitability and cost management expert, Steve will challenge some of the common premises of cost management and share case studies where companies have identified the true causes of costs and therefore profitability to then materially increased profits. He will discuss leading cost management techniques. Steve's passion is to turn finance departments into genuine business partners, changing them from corporate historians into fortune tellers where the CFOs can be relied upon for insights of the future effect of decisions on profitability, not regarded solely as the librarian of historic cost information.

Key benefits of attending Strategic Cost Management

  • Decision making needs management information (MI) which predict the future; learn how to report future profit contribution not last month’s history
  • Make your MI more effective; strip out the reports and KPIs that add no value to decision making
  • Identify & remove wasted cost
  • Make annual budgets more effective and reduce the effort (cost)
  • Uncover the hidden profit contribution or losses from customers and products