Real Life CFO Challenges Topic 6: Cost Centre Accounting

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cfo6.pngMeet JenniferCFO of a large organisation with multiple branches and multiple cost centres.

Jennifer's organisation struggled to manage costs across the business. The CEO and department heads have limited real-time visibility on committed costs within each of their respective cost centres or divisions. 

In post #6 of the Real Life CFO Challenges series, we'll dive into Jennifer's challenges and uncover how she improved the transparency of her business's cost centres.


Jennifer's Challenges:
 
  • Too many hours spent on adding up all the different cost centre expenses and journaling them to the General Ledger
  • Only able to see actual costs at each period end, making it difficult to manage unexpected committed costs
  • Limited real-time visibility on committed costs within each cost centres
  • Allocation mistakes are often made and there are no real measuring tool to control the approval of expenses
  • Difficulties with reporting on real-time costs


Jennifer's Requirements:      
           

A solution that can manage departmental or cost centre costs and the internal issuing of stationary stock within the entire organisation.
  • Centralised procurement solution
  • Visibility of current spending into each department /strategic  project
  • Keeping Budget controls and policy measures
  • Cost centre approvals and current budget comparisons
  • Electronic Requisitioning function for each departmental user within the business
  • Preferred vendor selection for better price management and catalogue pricing

The Solution: 

Jennifer found a powerful tool that enabled each user in the organisation to view the status of their request and the status of each document in the procurement process. The workflow capability in the system managed each request based on a collection of rules and then pushes it to the appropriate delegation authority. Documents are tracked and visible to the management team at all times.

Strict budget control were incorporated to manage costs before they are committed, which makes those tricky discussions with vendors on cancellation of invoices easier. Jennifer's company adopted a web-based centralised approval screen to enable all approvers to approve costs request anywhere and anytime.

The system provided real-time notifications via email and triggered prompts for action when needed and thus making the solution more effective.


The Benefits:

  • Reduced procurement costs across the entire organisation
  • Ability to keep electronic proof of attached documents
  • Better monitoring of company's compliance
  • Faster decision making process by virtue of user specific notifications
  • Reduced amount of paper flow between accounting and other departments
  • Historical procurement / cost information are kept at a glance
  • Cost centre reporting against budgets
  • Easily check if funds are available prior to committing the costs to suppliers, this means better management of liabilities and risk

If you’re interested in discovering how to improve the transparency of your business cost centres and more, talk to us today.


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