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What we Deliver - Effectively managing expenses requires an understanding of the cost drivers within an organization. Expense management is not only about reducing existing costs, but also about prevention. Costs accumulate rapidly and non-essential goods and services can grow alongside essential and necessary expenses. Identification of hidden costs, understanding which costs are unnecessary, and knowing which costs are inflated is essential to reducing existing costs and preventing future expense problems.
MGPS reduces non-core expenses which can range anywhere from 5% to 30% of an organization’s total expenses. Typically, savings potential is greater in non-core areas than core for a variety of reasons. Less time and effort is focused on non-core expenses which tend to be scattered throughout the organization, are not tied to revenue and are not critical. These expenses are frequently small ticket items and easily overlooked.
Proper expense management involves the whole organization and should not simply be restricted to the purchasing or accounting departments. Costs of Goods Sold (COGS) are generally the focus of expense management since these expenses are tied to revenue and gross margin is relatively easy to measure. They usually comprise a large portion of overall expenses so any reduction in these costs will be noticed.
Labour is often a significant expense.
Factor in benefits and associated costs, and it is easy
to see why organizations target this area for cost reduction.
It is easy to measure the results: reduced head count
means an immediate drop in spending. However,
while this is often the first target for organizations
seeking relief, there are ramifications including a
decline in productivity. As a short-term solution to
a problem with cash flow and profitability, a reduction
in labour is simple, efficient and quantifiable. However,
there are usually associated long-term problems, including
reduced productivity, which leads to reduced sales,
and lower morale, and increase turnover which leads
to higher costs.
The solution is to strategically assess costs, to separate essential from non-essential, to identify hidden opportunities and review current spending practices. How is progress measured, if at all? How are budgets determined? How are fixed costs and indirect costs organized? Where are the opportunities for cost reduction? MGPS reviews overall spend and separates core from non-core and identifies the areas of opportunity.
Understanding cost structures is essential to identifying cost savings opportunities. MGPS provides the knowledge and expertise to significantly reduce an organization’s expenses and positively impact both cash flow and the bottom line.
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