Magazine article Public Finance

Deciding Factors

Magazine article Public Finance

Deciding Factors

Article excerpt

DRIVING DOWN COSTS; making cost savings; cost-efficiencies - these phrases feature in everything we read about the public services these days. The current financial climate has moved understanding costs centre stage and challenges all public sector managers to probe their spending more deeply than ever before.

Finance professionals have a central role to play in analysing and explaining costs to decision-makers. They must be able to advise on the relevant information needed for different decisions, know the appropriate technique to apply, and ensure that data sources and the costing process are robust and reliable.

They will also have to convince their organisations of the need for a costconscious culture. Some senior staff believe that managing cost is difficult or the province of the finance department. This view has to be overturned and a culture promoted where it is seen as central to all managers' responsibilities.

To get this in place, organisation heads must lead by example and get the message out that cost matters at all times and at all levels throughout the organisation. This message has to be consistent and reiterated at every opportunity.

Organisations will need to set up supportive systems to build good relationships between operational managers and finance professionals. It is essential that each recognises the contribution and expertise of the other in ensuring that the decision-making process is supported with robust costing information and analysis.

Another way to spread the message is to share examples of how an understanding of costs has brought benefits. To this end, CIPFA has published a briefing on creating a costconscious culture, Counting costs: understanding and using costing information to make better decisions. It includes guidance for managers and examples of using costing information to support better decision- making.

As tough budget targets have been set across public service bodies, organisations now have to deliver on these. The starting point has to be a sound knowledge of the baseline against which managers can check their progress in driving down costs and driving up productivity. Organisations need to develop ownership of costs and expert knowledge of cost behaviours - not only horizontally within services but in categories across the organisation.

The middle manager is vital in making this change happen and must understand the importance of it. If staff at this level are to actively manage and control costs, they need to know how costs behave, what events cause them to change and what are the 'cost drivers'. …

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