Introduction on how can you implement a cost-cutting technique on a blue and white background with an illustration.

How Can You Implement Cost-Cutting as A Finance Professional?

Cost-cutting refers to actions taken by a business to lower its costs and increase profitability. Cost-cutting strategies are often employed when a firm is experiencing financial difficulty or when the economy is weak.

However, they can also be implemented if a company’s management anticipates future problems with profitability, in which case cost-cutting can then be incorporated into the overall business plan.

Moreover, if you are in a managerial position, even a non-finance one, you should have already encountered the cost reduction dilemma.

Therefore, I recommend you to read the article in the Harvard Business Review called “When You’ve Got To Cut Costs.” In my opinion, it will bring you other perspectives and a new way to look at the situation.

Quick Summary of Cost-Cutting

Here is a quick summary.

Getting to 10%: Incremental Ideas

  1. Consolidate incidentals.
  2. Take overdue personnel actions.
  3. Reduce spending on department management.
  4. Gain control of “miscellaneous” spending.
  5. Hold down pay increases.
  6. Repropose rejected cost-saving ideas.

Getting to 20%: Redesign Ideas

  1. Talk to your counterparties.
  2. Eliminating liaisons and coordinators.
  3. Reducing excessive service levels.
  4. Change the process.
  5. Reduced business requirements.
  6. Manual processes.
  7. Exceptions to the norm.
  8. Timing.
  9. Finally, move away from the belt-and-suspenders mind-set.

Reaching to 30% or More: Cross-Department and Program-Elimination Ideas

  1. Coordinate parallel activities.
  2. Shift the burden to the most efficient location.
  3. Also, eliminate duplicated analysis.
  4. Then, eliminate low-value meetings and forums.
  5. Furthermore, restructure or cut cross-department activities.
  6. Eliminate programs.
  7. Reduce the burden you place on others.

The Bottom Line – Cost-Cutting Is Not Always Eliminating A Cost

To sum up, it’s crucial to remember that cost-cutting doesn’t always entail eliminating a cost. Also, it can be used to represent efficiency and optimization. It is crucial to assess productivity since doing so may help you cut expenditures.

Additionally, there are applications available today that enable businesses to keep an eye on staff productivity and the amount of time spent on various tasks and projects.

If you want to become a finance professional and extend your knowledge, you can take my course.