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Unlock the potential of cost & profitability management

Unlock the potential of cost & profitability management

In today’s complex and quickly evolving business environment, CFOs need real-time and granular insights into the cost of their businesses, products, customers and different activities in order to monitor performance, be able to identify improvement and investment opportunities and make the right strategic business decisions. Finance Managers need an accurate view on what is driving costs to be able to quickly take corrective actions when needed, while pricing teams need to set prices based on accurate cost and margin information.

The 2020 KPMG Cost Management Benchmarking exercise focused on identifying current industry trends as well as insights into how international companies deliver their costing capabilities, and what key challenges they are currently facing when doing so.[1]

Our point of view on this 2020 KPMG benchmarking edition’s results are the following:

  1. Cost and Profitability Management is a high priority on the CFO agenda. The importance of cost and profitability management is increasingly recognized on the CFO agenda, given the significant strategic benefits it can provide.
  2. Companies still face challenges in balancing the efforts spent to deliver the costing capability against realized benefits and outputs. Key actions to improve efficiency of the costing processes across benchmarking companies include increasing system automation and integration, but also improving (master) data quality and stepping up data cleansing efforts.
  3. Finance cannot deliver the costing capability alone. To unlock organization-wide buy-in and realize lasting benefits, Finance should collaborate (more) with other functions within the organizational value chain of costing.
  4. Companies should move away from the spreadsheet-driven costing operating model to improve process efficiency and costing output quality, especially for delivering flexible and real-time cost performance reporting.
  5. …and integrate costing systems in the overall enterprise system architecture. Key system improvement areas observed across the companies include further integration between production management systems and costing/ERP systems, as well as harmonization of (master) data, data definitions and rules across the different systems and sites/plants.
  6. But don’t forget: it’s more than just a calculation in a system. Finance should avoid the common pitfall of centering its focus and efforts for costing exclusively around the technology and cost calculation components of its costing capability and consider the full costing Target Operating Model (TOM).

 

Read our insights from the study below or contact us for the full benchmarking report.

[1] Benchmarking was completed before commencement of the global COVID-19 crisis. The benchmarking results therefore do not include any changes in costing strategies and/or costing capabilities the benchmarking companies might have performed because of the crisis.

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