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Special report: Unlocking overhead value

Much current thinking rightly advocates the finance director (FD) as a business partner, focusing on driving forward the strategic objectives of the business. However, while taking on this demanding role, the FD or financial controller will still need to keep a firm hand on the finances.

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Full report is only available to Finance and Management Faculty members and subscribers to Faculties Online.

Unlocking overhead value
At the same time, we are well aware of the challenges businesses face in protecting the bottom line. Recent high-profile examples can be seen in the steel industry, which faces sharply fluctuating energy prices and rising labour costs, and in the music industry, where high-street retailers are competing fiercely against increasingly popular internet stores. When faced with these influences, the opportunity to reduce other pressures on profitability is very attractive.

This is, therefore, a good time to revisit the foundation of financial management and focus on a core requirement of finance professionals - managing costs and more specifically, overheads. It can be difficult to identify ways to reduce costs sustainably without impacting negatively on the rest of the business - it is tempting to use radical cost-cutting measures, or simply to rely on low-impact continuous improvement. In this special report, Develin & Partners provides us with an alternative - a way to unlock the value within your organisation's overhead.

We explore the importance of focusing on critical success factors and on the core business, of reducing diversionary activities, of ensuring value for money and, finally, of reviewing organisational structures and IT strategies. The benefits come sharply into focus when considering that up to 66% of the cost base in a service industry can comprise overheads - so there are potentially some big prizes on offer.

Author

Brian Plowman, managing director of Develin & Partners Ltd

Develin & Partners is a UK-based management consultancy founded in 1988. It specialises in cost management, helping clients to improve profitability and shareholder value. Services include: activity based costing and management; better budgeting; managing and reducing costs; measuring product and customer profitability; performance measurement; and redesigning and improving business processes. Develin also publishes a range of management booklets and case studies, available free.

Published by the Finance and Management faculty (SR15 - March 2007)

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