Improving Cost Efficiency

Duration: 3 Days

Overview

Businesses tend to fluctuate between efficiency and inefficiency depending on the prevailing economic situation and other competitive pressures. It is all too easy to acquire inefficient operational disciplines and accumulate ‘fat’ during an economic upturn when management attention and focus is diverted to growth opportunities and/or easily acquired profits.

 

However, the inevitable course of the downward economic cycle quickly exposes decisions that, with hindsight, do not have long-term operational benefits. This often leads to drastic cost-cutting measures and severe financial repercussions.

 

This course is designed to equip managers with the ability to spot the onset of financial inefficiency and address it before it becomes a chronic issue and learn how to keep on top of it.

Outline

How Businesses acquire inefficiency

  • Understanding the business and economic cycles and how shareholder value is created and squandered

  • How strategy and targets can often lead management astray

  • The negative influences on the decision-making process

  • How inefficiency creeps upon the business

  • Is there such a thing as financial stability and predictable growth in these turbulent times?

How inefficiency manifests itself

  • The tell-tales of signs of inefficiency that are often ignored by management

  • The battle between short-term quick-wins and long-term sustainable growth

  • Scenarios when growth can be harmful

  • Cultural and sociological aspects that contribute to inefficiency

Using Financial Reports

  • Key information to look out for

  • Stress-testing the financial statements

  • What the reports reveal and what they don’t

Overview of the efficiency diagnoses techniques

  • Cost efficiency ratios

  • Production efficiency ratios

  • Labour efficiency ratios

  • Materials efficiency ratios

  • Process efficiency ratios

  • Use of zero-based approach to challenge the status quo

  • Use of benchmarks and trends

  • Insolvency and bankruptcy signs

  • Limitations of ratios

Working capital management and Capital Structure

  • Funding the business: long term and short term

  • Equity versus debt

  • Short term solvency issues

  • The cash-conversion cycle

Viewing Finance as a Service Provider

  • Identifying stakeholders

  • Understanding the needs of users and customers

  • Customising service and information according to customer needs

Procurement & purchasing

  • Revisiting procurement contracts

  • Seeking value for money deals

  • Re-examining expenditure trends

Awareness & discipline

  • Instilling financial discipline in the management structure

  • Cascading the correct decisions making mentality and instilling financial awareness

  • Building financial resilience to avoid or mitigate inefficiency

How to maintain financial discipline

  • Is constant financial stability possible?

  • Identifying and Monitoring KPIs

  • Riding the economic cycle and learning to use it to re-evaluate operational structure

  • Being vigilant to the onset of inefficiency

  • Learning from errors and setbacks