An excerpt from an interesting article from CIMA’s Chief Executive, Charles Tilley: 

“At its most basic level cost control is about ensuring that budgetary controls are applied and that costs are only incurred if they are within the budget. When necessary cost can be reduced crudely but effectively by reducing budgets, or even imposing an embargo on certain costs, such as recruitment or capital expenditure. The discretionary costs that are often the easiest to avoid are those that bring longer-term benefits; in other words, sometimes only false economies are affordable.

But cost control is not the only thing that is required. The finance function must provide cost management and cost leadership across the business. Cost management is a more sophisticated approach. Over the past two decades many leading companies have already halved the cost of their finance function relative to turnover

Cost management is increasingly about applying disciplines such as Enterprise Resource Planning (ERP), off-shoring and Six Sigma across the business. This approach recognises that costs must be considered relative to the revenue they generate.

Cost leadership is essential to long-term survival. This is because managers must view costs relative to the value they contribute to the business or its stakeholders in the short and long term. So cutting costs to improve operating efficiency must be balanced by investment in developing the company’s competitive position…”

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