Recent years have brought unprecedented uncertainty in the form of high inflation, geopolitical conflicts, volatile energy markets and supply chain disruptions. Business leaders should prepare for whatever lies ahead—without sacrificing opportunities for long-term innovation and growth.

CFOs have an opportunity to step up as change leaders—shifting from basic cost-cutting tactics toward more strategic cost optimization. How? By analyzing cost structures. Designing cost-cutting programs. Identifying cost-reduction targets. And doing it all with an eye toward owning—not reacting to—the disruption.

Deliver value for today. Reinvest for tomorrow.

Smart cost cuts help profitability in the short term. But they also free up resources to reinvest in innovation and value creation for the long term. To balance these priorities, take a thorough, solution-based approach to cost optimization. More specifically, look for opportunities to drive transformation and deliver more value in three key areas.

1. Look for quick wins

Jumpstart your program by identifying opportunities to achieve fast wins and self-fund additional progress.

Many organizations find rapid cost optimization opportunities in areas related to working capital and spans of control. Unfortunately, that’s typically not as simple as focusing on a few cost items or implementing a 10-percent, across-the-board cost reduction.

Instead, take a more surgical approach. Use detailed analysis and data-driven insights to identify targeted cost cuts. Track the value of the savings using key performance indicators and other metrics. Then assign quantified performance gaps to each discrete opportunity. Such opportunities may include time allocated for transaction processing, invoicing, AR receipt processing, report generation, external audit fees and close cycle times.

2. Create strategies holistically

Transforming cost efficiency requires integration across non-financial data, business planning goals and near-term operational outcomes.

Such strategies require finance teams to align with other areas of the business and fully communicate cost-cutting activities and goals. The finance team can then identify and prioritize supporting initiatives. These collaborations may require finance to summarize the structure of cost-reduction initiatives, determine their impact on goals, quantify the level of effort and estimate timelines.

3. Build a formal framework

To make cost optimization successful and sustainable, consider these three steps:

• Rapid assessment based on a current and comprehensive understanding of finance processes, technologies and operating capabilities. Define operating model challenges and interview members of internal functions and shared-services groups to dive deeper into cost-efficiency opportunities.
• Refined operating model covering challenges and inconsistencies surfaced by the initial assessment. If needed, update benchmark analyses and identify potential risks associated with the future-state operating model.
• Initiative definition is organized around actions required to implement the future-state operating model and structures. To eliminate the risk of duplication—while estimating savings and costs associated with new initiatives—team members should perform comparisons against existing initiatives.

From there, keep fleshing out the plan—including outlining the specific outcomes for each initiative and documenting key activities, dependencies, risks and resources. Also important: the identification of specific cost savings, level of investment and return on investment for each initiative. Be sure to clearly document ownership of initiatives—it’s critical to fostering engagement and promoting the success of the cost optimization program.

Three questions to spark cost optimization

Starting a cost-optimization journey? Address questions like these:

• Where is the organization most productive? Least productive?
• What work is essential? What may be less critical?
• What would it take to build a resilient organization prepared to weather uncertainty without compromising future success and long-term growth?

Read this Getting Started guide for CFOs for a deeper look at how top-performing finance organizations optimize cost efficiency.