Businesses often see overheads rising as a proportion of total costs. Or rather, they don't see them!
Collinson Grant uses proven techniques to spot hidden trends, including:
- process activity analysis (PAA) - gives managers a lot more information about actual costs than they are used to by surveying processes, activities and tasks systematically. PAA pinpoints duplication and redundant tasks, thus improving productivity and creating opportunities to reduce costs by up to 20%. It works well because it is based on data that line managers have helped to prepare and analyse.
- appraisal of work content - evaluates accurately the work to be done in a set period. Work is broken down into discrete tasks and measured by the number of transactions and their duration
- activity-based costing (ABC) - allocates overhead costs to their true causes. It shows how the full cost is built up, highlighting unprofitable products and services. ABC improves decision making
- comparative analysis - reveals differences in productivity and working practices in units doing similar tasks. It reveals how to cut waste and rework and cut unit costs.
We have used these methods in Canada, Germany, France and the United States as well as on many occasions in the UK to help clients tackle the perennial problem of difficult to control indirect costs. Bureaucracies - in the public or private sector - often yield the biggest savings.
Read more in our book on Managing indirect costs.