cxo voice
  • Home
  • News
  • Expert Opinion
  • Leaders Talk
No Result
View All Result
  • Home
  • News
  • Expert Opinion
  • Leaders Talk
No Result
View All Result
Leaders Talk and Latest Tech News | CXO VOICE
No Result
View All Result
Home News Finance

CFO’s Cost Management Style Make Big Impact on ROI

News Desk by News Desk
May 15, 2019
Reading Time: 4 mins read
CFO Cost Management
Share on FacebookShare on Twitter

CFOs (chief financial officers) decisions in allocating resources to pursue growth and in cost cutting make quantifiable differences in return on invested capital. The best CFO’s cost management style can produce 7 percentage point difference in return on invested capital – According to new Gartner Study.

Focusing on driving transformation, Analytics, planning disruption, CFOs more likely saying their cost management approach, data and analytics capabilities are strong and hopefully implementation will being positive impact on ROI.

“Company costs have increased faster than revenue since 2013, creating a profitability gap that has not been filled even as earnings have improved from their 2014 slump, The choices CFOs make about how to allocate resources to pursue growth and how to cut costs show quantifiable differences to returns on invested capital.” said Jason Boldt, director at Gartner

Gartner study finding shows that companies spends for revenue growth also proactivly cutting cost, an approach Gartner calls “Efficient Growth,” significantly outperformed those companies that focused on high growth or on reducing costs alone (see Figure 1).

Figure 1. Return on Invested Capital Less Cost of Capital

Average ROIC — WACC, 2010-2017

ADVERTISEMENT
CFO Cost Management

Source: Gartner (May 2019)

Cost Managing is a prevalent theme in recent earnings transcripts, and large organizations already working on cost reduction programs. In an approx 81% organization’s cost depends on the industry they are operating. Rest 19% organizations cost controlled by executive cost decision management, and this is the point where best CFOs — who deliver the best return on capital — are making their impact felt.

Four “Cost Anchors” Drag Down Earnings

Gartner Study revealed four key “cost anchors” or negative behaviors that drag down earnings, that most companies suffered from. 87% organizations suffered from poor cost visibility, 89% from cost equivalence, 84% used outdated cost models and 90% suffered from business resistance.

To overcome poor cost visibility, organization should employ multiple budget models that provide a more flexible approach for identifying good costs from bad. A mix of rolling forecast, driver-based budgeting and zero-based budgeting provides CFOs with a clearer analysis of the relationship between costs and revenue.

To overcome cost equivalence, or the perception that all costs are the same, companies should separate costs into transactional and value-add categories.

Companies can update their cost model approach by using a service-based view of costs.

Overcoming business resistance is a matter of helping business partners focus on controllable factors.

Raising “Cost Ladders” That Positively Impact Earnings

Leading cost management executives also encourage four positive cost behaviors, or “cost ladders,” that contribute to positive shareholder return. However, fewer than one in three companies Gartner studied exhibit any of these positive behaviors.

  • Encouraging transformational bets: Companies with this positive cost management behavior have mapped their previous investment and clearly categorize between transformational and iterative bets. By doing this, CFOs can better decide how to allocate funds to transformational bets that will have the most impact on achieving the company’s overall investment criteria.
  • Increasing cost agility: Less than one in four companiesdisplay the cost agility needed to positively impact earnings. Cost management leaders employ “proof of concept” financing that investigates uncertain variables underpinning a growth investment’s chance of success. If a proof of concept test reduces uncertainty, CFOs release full funding to complete the growth investment. This uncertainty-reduction process gives management teams an edge on competitors in taking on risky growth bets with more confidence.
  • Detecting early cost warnings: Most companies don’t have a clear mechanism to flag when costs are likely to spiral out of control. Cost leaders in this area operate from a forecast model that identifies cost headwinds and tailwinds, which can be assessed on a quarterly basis, and considers factors such as foreign exchange rates; selling, general and administrative (SG&A) costs; pricing; volume; and productivity.
  • Rapid reallocation from losers to winners: Reallocating funds from losing to winning projects can have a very positive effect on overall company performance, but only 15% of companies actively manage projects in a way that makes this possible. An in-progress initiative review can provide the data needed to make such decisions. Evaluating projects that are in progress, based both on current performance and leading indicator trends, can help CFOs identify opportunities to provide additional capacity and funding to projects that are outperforming.
News Desk

News Desk

by CXO VOICE team memebrs, contact@cxovoice.com

Related Posts

CFOs budget
Business

CFOs target resources at functions that drive top-line growth

February 16, 2023
CMO
News

60% of CMOs Have Centralized Some or All of Their Function in the Pursuit of Operational Efficiency: Survey 

July 13, 2022
customer service and support leaders, work from home, Gartner
News

Gartner Predicts By 2025, 75% Of Companies Will “Break Up” With Poor-Fit Customers

February 24, 2022
Business productivity
Survey

61% of Supply Chain Leaders Expect a Permanent Hybrid Work Model for Frontline Workers: Gartner

February 3, 2022
CRM software in 2020
News

Gartner Marketing Survey Finds 64% of Consumers Try to Keep Work and Personal Lives Separate During Pandemic

January 11, 2022
Wipro's Digital Database Services (DDS)
News

IT Spending in India to Reach $100 Billion in 2022: Gartner

December 1, 2021
AI Software Market
AI

Global AI Software Market to Reach $62.5 billion in 2022

November 23, 2021
Business

Global Semiconductor Revenue Recorded 10.4% Growth in 2020: Gartner

April 13, 2021
Load More
ADVERTISEMENT

Expert Views

SaaS Rising: India is Ready for its Next IT Moment
Opinion

SaaS Rising: India is Ready for its Next IT Moment

January 31, 2023
Technology remains the main driver for insurance companies to scale and grow in 2023
News

Technology remains the main driver for insurance companies to scale and grow in 2023

January 10, 2023
Supply Chain Attacks – The Open Source Effect
Cyber Security

Supply Chain Attacks – The Open Source Effect

January 3, 2023
Technology Trends to Watch in 2023
Opinion

Top Technology Trends to Watch in 2023

December 21, 2022
Startups should embrace a down-round and restructure their firms: Flipkart CEO
Business

Startups should embrace a down-round and restructure their firms: Flipkart CEO

November 22, 2022

Latest Updates

Will never share US user data with China, says TikTok CEO

TikTok CEO says, will never share US user data with China

by IANS
15 hours ago

China's smartwatch shipments declined by 9.3% in 2022: Report

China’s smartwatch shipments declined by 9.3% in 2022: Report

by IANS
1 day ago

Hybrid workplace

78% of professionals heading back to the office by choice

by IANS
2 days ago

Adobe

Adobe unveils generative AI to enhance customer experiences

by IANS
3 days ago

Cybersecurity While Working from Home amid Coronavirus outbreak

Hackers targeted Google, Microsoft products via zero-day exploitation in 2022: Report

by IANS
3 days ago

cybersecurity

Google suspends shopping app ‘Pinduoduo’ after finding malware in versions

by IANS
3 days ago

Get Latest Update

Subscribe to our mailing list to receives newsletter direct to your inbox!

ADVERTISEMENT

Leaders Inerviews

Rising cyber attacks pose a serious threat to Indian SMBs, says Zakir Hussain
Cyber Security

Rising cyber attacks pose a serious threat to Indian SMBs, says Zakir Hussain

-
Axis Bank's Cloud-driven digital banking solutions
Banking

Axis Bank doubles down on cloud based digital banking solutions

-
digital-first strategy
Banking

Jana Small Finance Bank’s digital-first strategy enhances customer experience

-
email security interview
Cyber Security

What is email security? and its importance in securing enterprise networks

-

Entrepreneur

Samsung Electronics appoints its first female president

Inspiring Women Entrepreneurs in India (2022)

Technology Adoption For Entrepreneurs

Volunteering management is the need of the Hour

We bring business leaders' opinions and unique ideas on what’s happening in the market and its impact. Also, get the daily news, analysis, and insights.

Connect with us

Easy Links

  • Cryptocurrency
  • Event
  • Blockchain
  • Press Release
  • Resources & Downloads

Write Us

contact@cxovoice.com
  • Home
  • About
  • Contact Us
  • Advertise
  • Privacy & Policy
  • Feedback

© 2023 CXO VOICE

No Result
View All Result
  • Home
  • News
  • Expert Opinion
  • Leaders Talk

© 2023 CXO VOICE

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In

Add New Playlist

Our Spring Sale Has Started

You can see how this popup was set up in our step-by-step guide: https://wppopupmaker.com/guides/auto-opening-announcement-popups/