Now more than ever effective and efficient business processes are critical to surviving these uncertain times. Businesses are looking for ways to reduce costs, conserve assets, and increase efficiencies, and maximize their return on capital. The problem in tackling these topics is how to identify and prioritize cost saving opportunities. Although each company and industry has some uniqueness, there are some basic concepts to consider.

The revenue cycle is an area that most likely could use a tune-up. Depending on the industry, typical issues include unbilled services, merchandise, or royalties from errors in the invoicing process or a third party’s reporting process. Third-party audits identify dollars and provide a perspective on information quality. In addition, new revenue streams aren’t always given the scrutiny they need. Although Sarbanes-Oxley and financial statement audits provide reporting assurance, they don’t look for lost dollars under the materiality threshold and don’t include operational considerations; for example, billing cycle and collection efficiency.

Strong financial reporting controls over the disbursement cycle may exist, but the process may lack basic cost saving activities or concepts. Companies that run lean accounting departments typically find it difficult to manage vendors, negotiate contracts, leverage terms and conditions, and maximize purchasing power. Again, Sarbanes-Oxley and financial statement audits review for financial reporting compliance, not operational efficiency. A powerful assessment tool to evaluate how well these processes operate is benchmarking; for example, the number of FTEs, the number of invoices processed monthly, the number of invoices processed per FTE per month, percentage of contracted vendors, and leveraged technology (e.g. automated workflow, purchase cards and eInvoice delivery.) Direct savings can often be found by using the indicators as guides.

Process assessments are often overlooked as worth while solutions. The assessments are designed to evaluate not only control effectiveness, but the collective process efficiency. Areas that typically yield better efficiency include core business process: human resources, disbursements, payroll, accounting, fixed assets, and records management. The solutions are often times created using a combination of the resources already in place. Excel, Microsoft Access and other applications can be leveraged in conjunction with redesigned controls to create more efficient and effective processes. With companies doing more with less, it’s never been more important to ensure that the return on capital is maximized.

A key question that remains is how to focus resources to achieve cost savings. Most company executives have a general idea, but lack the framework to properly prioritize projects and resources. A risk based approach helps companies identify and rank potential review areas to create a tailored plan of attack. Factors that could be included in a risk based approach are, process complexity, level of management oversight, fraud potential, previous issues, and materiality. Using this type of approach helps ensure that the resources are focused in the most meaningful way.

Demonstrating to the Board of Directors or Executive Management that a company is doing everything possible to identify cost reductions, maximize savings and efficiently execute the strategic plan has never had more importance. Although there may be initial costs to execute a cost reduction or recovery plan, the benefits far out weigh the investments both in terms of dollars saved and increased comfort over internal controls.