Delivering Precise Reporting In Cost Savings

Confidential and Proprietary©2009 Ed Kerbs KERBS

Best Practices In Cost Savings and Expense Reduction:

Ed KerbsFebruary 2010

Gain Credibility by Measuring Savings & Spend Transparently.

Communicate Professional, Accurate and Precise Financials.

Consensus in savings measurement assumptions and lexicon can be more critical than delivering actual savings.


Savvy Cost Savers Generally Achieve Three Goals:

1) Meet Business Requirements• Requirements are missed regularly • Failing the business effects careers

2) Deliver Cost Savings (increased quality, decreased time to market)• Goes directly to the bottom line• Pure profit, net proceeds

3) Evolve Process• Make enhancements, drive process improvement• Automate – let the machine manage tedium. Communicate clear, timely and irrefutable financials• Become a trusted partner of the business you support

Save money and deliver timely financial transparency with unfailing accuracy and precision.

Best Practice


Questions Management Has Regarding Cost Savings:

“I Saved $15M Dollars”• Was it a “soft” or “hard” dollar save?• Is that $15M save fiscal, calendar and/or carryover?• Is the save a one time, ongoing or combination?• Is it an annualized save? • How was the money saved? Who gets the credit?• How does this effect my budget?• What is the timing of the save?• Was the savings capital or expense?• Where did the data come from around the save?• Does this data contradict other data?• What are the ramifications of the savings (spend) data to the intended and unintended

audience? • What term does the $15M cover?

Best Practice Have clear, credible answers to savings questions off the top of your head or at your fingertips. Savings and their positive effect on your career is nullified if you are not perceived as credible. Perception is reality. If unsure say “I don’t know, I’ll get back to you by X” …. And honor your word.


Questions Management Has Regarding Cost Savings: “I Saved $15M Dollars”• Was it a “Cost Avoidance”?

• New cost not in a budget, baseline, contract or competitive bid.• (What I “was going to pay”) – (What I am ending up paying)• Negotiated Price Reduction without “apples to apples” • Must subtract out any hard dollars spent to net.• Additional uncharged services translated to “soft dollars”

• Was it a “Negotiated Save”?• (What I paid before) – (What I pay now)

• For exactly the same or more “apples to apples”• Must subtract out hard dollars spent to net - Use red for loss ($2.9K)

• Actual A/P dollar credit to the treasury – Measured in two ways• One time charge (OTC), current single credit• Ongoing credit, recurring (monthly, yearly etc.)

• Cost reduction against the final set of terms and conditions*

Best Practice – Defining The Type of Save Credible actors and savings rely on a common lexicon. Gain agreement* Conservative never inflated measurement is key, publish budget implications. Scorecard – Dashboard quarterly / monthly across relevant management scope = increased job security.


Questions Management Has Regarding Cost Savings: “I Saved $15M Dollars”• Where did the data come from around the save? Does this data contradict other

data?• Vendor data ≠ Finance GL data ≠ A/P data ≠ management reports?• Multiple stakeholders, different messages, different data & views?• Improve Data Quality - Publish With “Eyes Wide Open” :

• What are the ramifications of the spend (savings) data to the intended and unintended audience? Could blindsiding occur? Is consensus needed?

• Did the savings get “double counted” or even “spent” by more than one stakeholder?

Best Practice – Understand Audience & Consequence A new ground up standardized measurement system and managerial financial reporting infrastructure might be needed Team needs to include Finance, Vendor, User/Client, Purchasing - automation & proper data inputting and coding is key Resetting expectations, gaining agreement on changing process take time and potentially $’s and headcount

Vendor G/L

Finance A/P

Purchasing

BudgetManagement

User/Client

??$??


Questions Management Has Regarding Cost Savings: “I Saved $15M Dollars”

You have seen a 5 page excerpt of an 8 page presentation• I give four presentations covering cost savings

• Delivering Precise Reporting In Cost Savings – 8 pages - accurate/precise savings financials

• How To Set Up a Cost Savings Office – 10 pages, day 1-100, pipeline structure & governance

• 3 Ways To Mine For Cost Savings – 23 pages, 3 effective & proven methods to mine for savings

• Vendor Management Office (VMO) -15 pages, maps VMO goals, function & KPIs

• Contact me any time• Ed Kerbs

• 847-323-9986

• [email protected]

• LinkedIn Profile http://www.linkedin.com/in/edkerbs

Contact Ed Kerbs I am a procurement executive with a background in IT and the financial industry. I am different in that I build and

manage teams that save money via Cost Savings Offices (CSOs). I am expert and highly experienced in mining for savings by looking at contracts, invoices, inventory & business process (6 Sigma Black Belt) to determine ways to reduce expense.

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Delivering Precise Reporting In Cost Savings