A Penny Saved Is A Penny Earned

Process Expertise | Cost Efficiency and
Optimization

A constant struggle of entrepreneurs is to increase their sales levels. This approach does not necessarily generate higher margin. We have seen numerous cases where costs and expenses are not properly managed, the increase in volume results in lower margins.

Let's focus on expenditure management. These can be classified into:

  • Fixed expenses: The expenses that, month after month, remain more constant at their full amount, regardless of fluctuations in the volume of work done. The examples are wages, taxes and insurance

  • Variable expenses: are those expenses that change in total amount, related directly to the fluctuations in production or volume of work done.

They are also identified as:

  • Impact in the short term: These accounts are subject to optimization by developing immediate strategies.

  • Impact in the medium and long term: These accounts are related to the balance sheet assets and liabilities accounts.

  • Indicators for measuring and monitoring expenses.

cost optimization

The Challenge

Sometimes, companies begin to view their expenses as normal and necessary for the operation, forgetting the opportunity of optimization potential through proper management. Some reasons include:

  • Lack of planning on spending budget without the support for calculating the estimated amount by item.

  • Lack of proper allocation of expenditure by cost center, resulting in inadequate control and measurement thereof.

  • Failure to assign responsibility for the control and management for each category of expenses.

  • Absence of an organizational culture focused on rationalization of expenditure. Lack of feedback, lack of knowledge of the opportunity areas and how each employee can impact the improvement actions.

  • Reactive and late behavior to the breach of the expenditure budget, once they have already executed it.

Hence, London Consulting Group supports its clients to identify areas of opportunity to optimize costs which can be controlled, and with the personnel of the client, define and implement actions to rationalize.

We analyze how these expenses are hired or incurred, which ones are the sub-accounts, what triggers the consumer, who authorizes the expenditure, product or service providers, current conditions of the agreement, etc. Later, we identify the four rationalization alternatives: elimination, restriction, negotiation or replacement.

The actions to manage spending must be continuous, not only punctual or sporadic. To do this, our methodology allows companies, over time, to master the tools and procedures to support the actions implemented, therefor having a positive impact on profitability.

Solutions

  • Expenditure budget model.

  • Detailed analysis of expense accounts. Pareto classification of accounts.

  • Assess the accounts to impact.

  • Implementation of the Corrective Action Plan Committee.

  • Proposed solutions for the rationalization of expenditure.

  • Control bureau and allocation of major accounts to a Guardian Account.

  • Define policies: levels of authorization and operating ranges.

Benefits

  • Decreased accounts of impact expenses, improving profitability.

  • Improved compliance rate to the budget of expenses.

  • Visibility and transparency in the implementation of expenditure

  • Culture spending control, generating responsibility and accountability on staff.

Our customers

Anacafe
ING
Syngenta
La Colonia
Casas Ara
Banco Uno

"... The management of change, the dedication of the team members, the methodology applied and transferred in the different phases of the project were very useful for our business and for the achievement of the objectives set, highlighting the reduced spending by 33% by implementing control strategies."

- Nils Leporowski, President, Anacafé (Guatemala) ROI 3.9 to 1