Identifying, reducing, and optimizing costs is critical for success, according to a recent survey of CFOs and other top finance executives. The survey—conducted by CFO Research of Industry Dive in partnership with Expense Reduction Analysts (ERA)—also reveals a direct correlation between how well a company performs and whether it values external advice on identifying and assessing cost savings.
“Now more than ever, it is critical for companies to know for certain, not just guess, that they are optimizing their costs to the maximum amount possible based on their industry, size, and geographic location”, said Charlie Smith, ERA’s CEO of North America. “Technology and benchmarking data have far outpaced most CFOs ability to take advantage of opportunities that are hiding as expenses in their General Ledger. Instead, they are left to flounder trying to cut headcount in order to hit their cash shortfalls. That is why using an established cost consultancy is crucial to realizing those cost savings as soon as possible, while continuing to employ their most precious asset, their people!”
Top priority: Cost issues
A large majority of the CFOs, CEOs, and other finance executives in the survey—81%—say that maintaining a high degree of cost discipline over the next 24 months will be critical for growth. The executives also put cost analysis at the top of their list of priorities for their finance teams over the next 12 months.
By several measures, the survey shows that well-performing companies value external advice on cost savings more than underperforming companies. One example: Most executives from companies that expect to meet or exceed expectations in 2021 say consultants play a key or leading role in identifying and assessing cost-saving opportunities at their organizations. At the companies that expect to underperform in 2021, none of the executives say consultants play a key or leading role on cost issues.
Also, executives from successful companies are three times more likely than their less-successful peers to strongly believe that cost discipline is critical for growth.
Engaging cost experts
The survey results also offer some insight into why the executives seek external expertise on identifying and assessing cost-savings opportunities. The executives evaluated their finance teams’ performance on cost management activities, and they flagged four areas that were most in need of improvement:
- Monitoring expenditures and analyzing expenditure variance
- Automating, outsourcing, or streamlining administrative processes
- Negotiating better deals with vendors for reduced prices, better service, and better quality
- Monitoring margin erosion by vendors and suppliers.
Another factor driving CFO interest in engaging outside expertise on cost issues is the pressure to move quickly, with 81% of the surveyed executives saying that cost optimization will directly impact their ability to meet business goals this year. Because of the supply chain issues and other business disruptions experienced by the companies represented in the survey, having the ability to analyze new data and pivot quickly is critical.
Survey Methodology The survey, conducted by CFO Research of Industry Dive in partnership with Expense Reduction Analysts, polled 166 senior finance executives in Q3 of 2021 executives at companies across 18 industries in the United States through an online, invitation-only survey. Most (33%) of the respondents were CFOs; the other survey respondents included EVP or SVP of Finance (21%), VP of Finance (19%), Director of Finance (15%), CEO, President, or Managing Directors (6%), Controllers (3%), and Treasurers (3%). The respondents represented companies with up to $500 million in annual revenue, with 48% of respondents in the $100 million to $250 million range, 38% of respondents in the $50 million to $100 million range, 7% of respondents in the $250-$500 million range, and 7% of respondents with less than $50 million in annual revenue. Respondents work for companies in nearly every industry.