1. COST MANAGEMENT- A CULTURE TO BE NURTURED
K.N. RISHIKESH
CFO AND CS
INSIGHT MEDIA CITY (INDIA) PVT. LTD.
(FLOWERS TV)
KOCHI

2. WHAT IS COST?
Cost is the value of money that has been used up to produce something. It is a monitory valuation of effort, material, resources, time and utilities consumed, risks incurred and opportunity foregone in production and delivery of a good or service.

3. COST MANAGEMENT
Cost management is the process of planning and controlling the budget of a business. It helps the business to predict impending expenditure to reduce the chance of exceeding the budget

4. COST CONSCIOUSENESS
It is an urge not to spend more money than is necessary
Having an awareness of costs, careful about spending

5. Eg: Direct material, Direct labour, Certain factory overheads
CONTROLLABLE COSTS
Costs that can be influenced or regulated by the person responsible for it.
Eg: Direct material, Direct labour, Certain factory overheads

6. UNCONTROLLABLE COSTS Costs imposed by top management
Costs collected to different departments
Eg: Advertisement cost, depreciation, insurance, share of rent etc.

7. HOW TO BE COST CONSCIOUS
Cost consciousness is a culture
How to drive this behaviour
How do we know that we have achieved cost consciousness
Process is to build a culture, not a company
Position is not a bar
Culture underpins your organisation’s corporate values and business strategy-ultimately success of the business
Creating a cost conscious culture means being aware of the entire value proposition
contd…

8. A working to protect and generate value on an ongoing process
Cost can be about focusing on price, but really it needs to be about innovation, cost management and efficiencies.
It is the mind set that considers the benefits and implications of cost cutting and weighs up the risk too. If we loose a customer by cutting cost, it is not the right decision. This mind set needs to be ingrained in to the organisation as a whole, not just its leaders.
Creating an enduring corporate culture focused on strong and sustainable cost discipline. This requires universal and tireless efforts
contd…

9. to engage and motivate the entire organisation to deliver on that vision
A cost conscious culture is about helping everyone at all level, understand how they can optimise cost base and empower them to take action
Cost conscious culture should create a positive impact and not negative
It is lived, day-to-day by everyone
It is enshrined in the mission statement of the company
contd..

10. It should be measured
Encourages all to continuously look at improving the bottom line (be it revenue, cost or both)
Improves the product/service so that the customer growth occurs.

11. IMPLEMENTATION OF THE CULTURE
Strong direction and support from top management for the cost reduction initiatives, with a clear link to the organisation’s strategy, scope and objectives.
A strong foundation in place before introducing transactional initiatives
Ability to assess and challenge the overall spend culture of the organisation
Bridging the silos – frequent interaction between Finance and Operating managers for better cost reduction decisions and tracking of results
Effective and ongoing communication regarding cost reduction plans to lessen resistance among staff
Efforts from entire work force

12. Implementation… Continuous commitment
Control cost throughout the product/service life cycle
Incentivise productivity and innovation
Eliminate unproductive processes and bureaucracy
Promote effective competition
Improve professionalism of entire work force
Continuous learning and education
Understanding cost element drivers
contd..

13. Implementation…
Develop clear goals – build accountability for this goal by assigning to individuals or teams at all levels
Focus on areas of opportunity – avoid waste ad redundancy. But keep customers’ satisfaction intact.
Make it fun and worthwhile : Eg; Holding a contest with some awards
Accurate and timely records
Regular performance reviews
Plan of action – budgets
Delegation of cost control responsibility and authority

14. CMA’S ROLE Collection of cost data
Analysis and interpretation in a meaningful form
Presentation to management with reasons of variance compared to standards set
Initiative to drive the process
Cost audit at appropriate time

15. COST SHOULD BE AN EVENT, NOT A DISCIPLINE

16. PRICE IS WHAT YOU PAY, VALUE IS WHAT YOU GET - WARREN BUFFET

17. THANK YOU