The hidden saving expedition

CFOs face mounting pressure to maintain financial stability while driving growth. Behind routine financial tasks lie untapped savings opportunities, often overlooked due to the complexity of modern business operations.

Many enterprises unknowingly miss significant savings within their total spend, underscoring the substantial potential for cost optimisation. CFOs must balance strategic planning, risk management, and regulatory compliance while seeking ways to bolster the bottom line.

Rapid technological changes and market disruptions compound this challenge.

Beneath day-to-day financial management, there are several savings opportunities. From complex supply chains to opaque service agreements, the modern business landscape is filled with overlooked cost optimisation areas. Strategic partnerships with specialised organisations can provide valuable expertise and insights to uncover these hidden savings.

Why Finance Teams Miss Savings Opportunities

“There are three main areas that finance teams struggle with when attempting to conduct an in-depth cost analysis. The first is capacity,” says Neil McCallum, ERA Group Consultant. “It is very time-consuming, and challenging, to review thousands of lines of supplier data, and then organising that data using a methodology that produces meaningful analysis.

Finance & Procurement teams prioritise essential tasks like direct procurement, budgeting, forecasting, and compliance, potentially overlooking savings in non-core areas such as fleet management or insurance contracts. While they excel in financial management, they may lack expertise in niche areas crucial for identifying savings, such as manufacturing consumables, IT, or procurement strategies.

For instance, a finance team might excel at analysing profit margins and cash flow but may not have the bandwidth to scrutinise the efficiency of the company’s fleet management or the intricacies of its insurance contracts. These areas, whilst not directly related to financial reporting, can harbour substantial cost-saving potential.”

McCallum notes that once you have this analysis, the results need to match the service, quality and sustainability criteria of a business, and there needs to be an understanding of the market annual price increases, and whether they are justifiable.

“Furthermore, for a complete picture, the level of service performance and engagement with stakeholders also needs to be reviewed,” he says. “Thirdly, knowledge and insight into the suppliers of that service is key for understanding what good looks like, how your costs compare for that service with your peers, what the best quality, service, and sustainability standards are whilst maximising operational efficiency. This insight is something ERA Group, with a global network of 1000+ people, can help with.”

Operational silos within organisations can lead to a fragmented view of spending, hindering the identification and implementation of cost-saving measures. For example, the IT department might manage software licences independently, without coordination with other departments, potentially resulting in duplicate purchases or underutilised subscriptions. Similarly, facilities management might handle utility contracts without input from finance on potential cost-saving strategies or awareness of company-wide sustainability goals.

The rapid changes in technology, regulations, and supplier landscapes require agility to seize cost-saving opportunities, which can be challenging for time-constrained finance teams. Fluctuating commodity prices, for businesses reliant on raw materials or energy, can have a substantial impact on costs. Identifying the right moment to lock in favourable prices or switch suppliers requires both market knowledge and timely action.

Moreover, resource constraints, including limited time, staffing, and analytical tools, can restrict finance teams’ ability to conduct in-depth cost analyses and optimisation projects across all areas of the business. With pressing daily responsibilities and cyclical financial processes, finance teams may struggle to find time for detailed cost analyses, especially in non-core areas.

The Strategic Advantage of Partnering with A Specialist

Collaborating with specialist organisations like ERA Group (ERA) can provide significant advantages in uncovering hidden savings. These specialists offer deep industry knowledge, functional expertise, and market intelligence crucial for identifying savings opportunities that might be missed by internal teams.

“We have insight into what others are paying for the same service, and we can effectively benchmark against this to see if you are getting the best possible return on your investment,” says James Rimmer, a CFO and Managing Director turned ERA Group Consultant.

“A team like ours can review cost areas and likely find double or triple the amount of savings than an in-house team could secure.”

ERA’s forensic approach to cost analysis includes data-driven assessments and cross-functional evaluations, which can uncover savings opportunities that internal teams might overlook due to time or resource constraints. This approach typically involves utilising advanced analytics tools to dig deep into spending patterns, looking beyond departmental silos, and conducting in-depth assessments of current and potential suppliers to ensure the best possible terms and service levels.

“It is very difficult to access benchmarking data, so it can be very hard to internally benchmark business performance by using industry averages or what best in class can look like,” says Rimmer.

“Even beyond pricing data, it is also important to understand the buying habits that sit alongside that. We do see businesses securing good rates for their level of spend, but what most don’t see if the pricing of what a larger organisation could access.”

Neil Pinner adds; “It can be very difficult for a business to compare their procurement against competitors without outside help. However, I would suggest engaging with internal stakeholders early in the process, to allow time for a thorough review of what is working well, and what isn’t.”

Specialists often focus on solutions that not only reduce costs but also contribute to environmental sustainability, aligning with corporate social responsibility goals. This dual focus can lead to solutions such as energy efficiency initiatives that reduce both costs and carbon footprint, waste reduction strategies that lower expenses and improve environmental performance, and sustainable procurement practices that consider both cost and environmental impact.

The benefits of such partnerships extend beyond one-time cost-saving exercises. Ongoing support ensures continuous improvement, knowledge transfer, and adaptability to evolving business needs. This includes regular reviews to ensure that savings are maintained and new opportunities are identified as they arise. Over time, internal teams can learn from the specialists, enhancing their own capabilities in cost management.

Neil Pinner, an ERA Group Consultant, provides further insight; “Working with a specialist organisation offers a fresh set of eyes on your internal processes, that may have been in place for many years,” he says.

“This can spark new ideas, and drive change in your business. We can quickly and effectively provide insight into industry best practice, so you know what you should expect from your suppliers.”

This long-term approach helps businesses stay ahead in a competitive landscape and creates a sustainable strategy for cost optimisation. As business needs evolve, the partnership can adapt to focus on new areas or challenges, helping to identify and mitigate risks associated with changes in the supply chain or regulatory environment.

Taking the step

Uncovering hidden savings opportunities is both a challenge and a necessity for organisations seeking to maintain their competitive edge. While CFOs and finance teams face numerous obstacles, partnering with specialist organisations can transform their approach to cost optimisation.

Hidden savings exist across various business operations, often outside finance teams’ core focus. Internal challenges such as operational silos, resource constraints, and the pace of market changes can hinder the identification of these opportunities.

Specialist partners bring invaluable expertise, comprehensive analysis capabilities, and a focus on sustainable solutions that can uncover significant savings.

For CFOs aiming to drive financial performance, consider the potential impact of bringing in specialised expertise. Could a fresh perspective and dedicated resources uncover savings that have thus far remained hidden?