Method:  Developing more strategic management of cost
    

Your requirements for cost management will be governed by your strategic goals, your history, how individuals within your organisation wish to shape your culture and operation.  They will be unique to you.  There are however five strands to our approach which taken together will provide you with a knowledge and understanding of cost that will strengthen your strategic planning process, your day to day controls, your search for cost and process improvements, and your planning, forecasting and budgeting processes.  The five strands are as follows:
 
 The use of activities and their drivers as the basis for measuring and reporting costs;
 The creation of budgetary structures better aligned with the delivery of outputs;
 The development of forecasting and budgeting processes that better support strategic planning and implementation;
 Methods for tightly monitoring and controlling cost without undermining the service to the customer;
 Education and training to develop a strong culture of cost consciousness.
    


Each is explained in more detail below:


  1.Activities and their drivers as the basis for measuring and reporting costs
  Activities are words that define what your people and systems do that create your outputs.  They also define what you spend your money on.  Your costs can therefore be mapped to relevant activities and the activities (and their costs) can be mapped to your outputs.  They can therefore tell you much about the steps you take to create outputs, how well the process works, what it costs, and whether you receive a return for the effort.  We provide you with:
   -A model of your organisation which contains component activities and processes, their costs, and how the drivers of cost operate and influence cost;
   -Methods of activity cost analysis that will yield information about the value for money within processes, measures of efficiency, the balance of cost across different types of activity.
    
  2.Budgetary structures better aligned with the delivery of outputs
  Some organisations are able to make lighter work than others with the reporting of the costs and value for money associated with outputs and processes.  We provide you with a review of budgetary structures that will identify how you can lessen the load e.g.
  -
How budgetary structures can become more aligned with relevant processes and better able to report their costs and value for money.
  -Consolidations in structures that will simplify reporting and control without any loss in the quality of reporting.
  -Updates to the chart of accounts that will better support  the on-going reporting of process and activity costs and income.
    
  3.Forecasting and budgeting practices that better support strategic planning
  Forecasting and budgeting and strategic planning may feel like quite different activities.  One is forward looking over several years, is concerned with outputs, and operates at a high level.  The other looks forward over a shorter period of time, is more detailed and more functionally based, and is often more concerned with inputs than outputs.
  We provide you with a review of forecasting and budgeting practices that will better integrate the two processes e.g.
   -Clarity about the primary purposes for budgeting and forecasting and how well current practices achieve those purposes.
   -The extent to which information bases that drive the quality of budget and forecast outputs could be improved.
   -How the basis for forecasting and budgeting for cost could be better grounded in activities and their drivers.
   -The extent to which there are behaviours which undermine the ability of budgeting and forecasting to support strategy implementation.
    
  4.Methods for monitoring and controlling cost without undermining service to the customer
  Organisations that remain agile despite possessing tight controls over cost and income and possessing minimal financial risk often have highly developed financial supply chains.  These are the processes for purchasing inputs and for moving invoices, payments and goods and services between suppliers and customers.
  We provide you with improvements in the operation and reporting of those processes which ensure tight control is maintained as well as highly responsive services to customers and suppliers.
    
  5.Education and training to develop a strong culture of cost consciousness
  Another feature of agile organisations is a management team that has a shared understanding of costs which is applied easily and quickly within day to day decisions.  Several factors have to be in place e.g.
   -Reporting that provides a clear and unambiguous view of cost behaviours, value for money and financial returns from process that straddle functions.
   -An embedding of process definitions within the key management frameworks (budgets, forecasts, performance reporting).
   -A culture that espouses team based decision making and an absence of competition amongst individuals within a management team.
  This will be difficult to achieve without there being progress within the other four strands.  However we will provide with and support you in implementing a change programme that will lead to the embedding of cost conscious behaviours within your management team.