If you could ask for advice on strategic cost management to a professional, who would they be? What would they work on? For a moment imagine what that person would be like. Can you picture it?
Probably, the image that came to your mind is of someone similar to Ivan, CFO of Banco Múltiplos, in São Paulo. Ivan works in a business that deals directly with financial results, operating in the largest city in Latin America.
In such a scenario, we can conclude that your company’s cost management processes have always been modern and efficient, right? Not always.
At times, a company’s numbers can yield unreliable results. This is common when they are generated by obsolete systems. In such cases, the reports based on this data can cause directors to make bad decisions. Let’s understand more about this subject by learning about Ivan’s story?
Strategic cost management: When reports lie
When Ivan thought of cost strategy, one goal came to mind: to reduce it. This is natural. For a long time, cost reduction was seen as a way to be efficient. Being able to perform the same process while spending less was a goal that seemed obvious.
The technological progress reaffirmed this argument, as many processes began to cost less – while the incidence of errors declined.
However, there came a time when that no longer made sense. Ivan had access to reports that presented the results of his cost processes, showing which products cost a lot, which customers brought profit to the branch, and so on.
Even so, he realized that his strategic decisions did not deliver the expected results. Why did the technology used by the bank generate data that led to wrong decisions?
The answer was simple: The tool used to collect this information was not ideal.
The importance of creating reliable reports
The systems Ivan used to track the bank’s process outcome metrics caused him to confuse some important concepts for strategic cost management.
Do you want to know what these concepts are? You already know them, but let’s remember their names and meanings.
It occurs when the company invests its capital in the acquisition of some asset, good or service, aiming at a future gain.
It is the cost of acquiring something related to the production of the good or service that will be produced by the company.
It is what is consumed by the business directly or indirectly in order to earn revenue.
It is the amount spent to acquire a good or service.
It occurs when a contracted good or service is consumed uncommonly and without proper control.
It occurs when the company pays for some product or service necessary to obtain some important asset to the business.
Having made this brief clarification of these concepts, it should be clear how dangerous it is for a company to confuse them, right? That was exactly what happened with Ivan.
The sales process presented major losses to the bank, even while the team celebrated good results. This was because the cost management of this process was not performed properly.
This meant that many resources were invested to persuade customers to purchase services that did not bring the bank such an advantageous profit margin.
In fact, this created a number of problems, as an unhappy customer tends to cancel this service, requiring company actions to contain the cancellations.
Moreover, the image of the bank’s services was also compromised, as these people were not satisfied and would hardly recommend the institution to their friends.
To reverse this scenario, more and more investment was needed, and as the strategies remained the same, the waste of resources continued.
The situation experienced by Ivan is very common and represents an uncertainty to entrepreneurs from various segments. How can a company that is selling well have negative results?
Using software to reverse this situation
Tired of this outcome, Ivan decided to control the bank’s financial results in a smarter way. The technology used so far had proved inefficient.
Ivan realized that the systems used by the bank focused on tax issues, for example. Therefore, even though the accounting team was satisfied, as the software was useful for filing tax processes, it was not reliable for financial reporting.
The bank needed to find out how much each customer cost and what services brought profit to the institution. You can’t do that with accounting software, can you?
It was then that Ivan held a meeting with the MyABCM team. Operating in over 50 countries, this company has developed advanced solutions for managing costs of brands.
MyABCM management solutions can be combined with other programs, so that its application does not cause day-to-day business disruption.
With a well-executed cost analysis using state-of-the-art technology, Ivan had access to reports that showed him which bank processes were costs and which were expenses.
This made it possible for him to set goals hat were backed by reliable data. Obsolete processes were eliminated, expensive services were redesigned, and even the ideal customer profile was reevaluated.
Thus, the sales team could focus on the audience that really brought results to the bank, reducing the cancellation rate and improving the company’s image on social media.
As we have seen, as much as a person knows a lot about a market, they can be making a lot of bad decisions. This happens when the source of information is unreliable.
It is common for some directors to change their staff all the time, as they think it is the professionals who cannot understand the business, when in fact they all have access to bad reports.
Your strategic cost management cannot take that risk. So, rethink the tools you have been using to track your results.
Do you want to understand how MyABCM solutions can be applied to your company? Then contact our team!