Companies often feel like they’re leaking money. No matter how diligent they are with budgets and spending, costs always seem to creep up. Profit margins get squeezed tighter and tighter even when revenue is growing.

In my decade as a consultant helping organizations optimize their spending, I’ve learned a simple truth: Every company has inefficiencies and excess waste baked into their budgets. It takes fresh eyes and rigor to identify those hidden costs and start reducing bloat.

That’s why we consultants get called in. As an objective outsider, I can forensically analyze an organization’s finances, processes and culture to pinpoint savings. Then, I work collaboratively to right-size budgets and instill spending discipline that sticks.

In this post, I’ll share the proven step-by-step methodology I guide clients through to illuminate waste and excess spending. The strategies include understanding needs, analyzing data, observing processes, interviewing employees, reviewing vendor relationships and more.

Implemented holistically, these methods help uncover millions in potential savings – funds that can be invested to drive growth or drop straight to the bottom line. Just as importantly, we institute cultural changes that enable continuous cost optimization.

Let’s dive in to how consultants like myself help organizations finally get control of their spending.

Understanding the Company’s True Needs

I always start an engagement by asking clients a simple but profound question: “What do you really need to deliver value to customers and operate efficiently?”

Too often, companies lose sight of their core purpose and essentials. Legacy activities, outdated services, mission creep. Before long, organizations are burning resources on things that may no longer be critical or even useful.

My first task is facilitating structured conversations with leaders across the business to map out their absolute necessary activities. I probe to separate the “must-haves” from the “nice-to-haves.”

For example, does the company really need 5 internal newsletters or are 1 or 2 sufficient? Do managers truly require customized offsite leadership training or could a streamlined company-wide program work? We question every budget item through the lens of real needs.

This is harder than it sounds. After years of doing things a certain way, decision-makers are often stuck in their thinking about what’s essential. As an objective outsider, I play the role of constructive challenger to respectfully pressure test conventions.

Understanding the company’s genuine core needs provides a benchmark for evaluating all spending going forward.

Analyzing Spending Data

Next, armed with clarity around actual needs, I roll up my sleeves and dig into the numbers. This allows me to identify waste disguised in budgets and spot trends that highlight bloat.

I start by documenting every existing spending category across the company and the historical amounts allocated. Then, I ignite my spreadsheet with advanced analysis to illuminate outliers and anomalies.

Are certain departments or locations spending way more than others for similar activities? Have specific budget items crept up year over year despite flat business volumes? Does anyone even know why we spend so much on particular tools or services?

I look for patterns like the 20% of spend driving 80% of the waste. The long tail of small excess costs also deserves scrutiny –  those low-visibility expenses that people assume don’t matter. Pennies become dollars.

My goal is to leave no stone unturned, using data forensics to unmask pockets of waste hiding throughout the company’s budgets.

Conducting Employee Interviews

Employees on the frontlines often have valuable insights into where resources are being wasted in their day-to-day work. Consulting with employees across different roles and departments can help identify inefficiencies and unnecessary expenses that management may be unaware of.

Consultants can conduct focus groups, surveys and one-on-one interviews asking targeted questions to uncover spending issues. Employees may point out duplicate processes, unnecessary training requirements, complex software systems and other areas of waste. Be sure to get perspectives from multiple levels to find spending gaps.

Observing Internal Processes  

Seeing workflow processes and operations firsthand also allows consultants to pinpoint waste. Consultants can shadow employees and managers to experience the internal systems and controls. This may reveal slow, manual processes that delay work. It can also uncover bottlenecks from inefficient processes or technology.

Through hands-on observation, consultants may identify overlaps in roles causing duplicated effort. They may see how employees work around deficient systems and tools, indicating areas for investment. The on-the-ground view exposes waste and excess that may be invisible to executives.

Identifying Duplicate Tools and Services

Organizations often inadvertently pay for overlapping tools and services that could be consolidated. For example, there may be multiple departments purchasing their own subscription software for the same function or several divisions managing separate supplier contracts for similar work.

Consultants can methodically catalogue tools, technologies and services across the company to identify duplicates. Consolidating these areas to eliminate redundancy can lead to significant savings. Consultants may also find opportunities to negotiate volume discounts.

Reviewing Vendor Contracts and Relationships  

A detailed review of vendor contracts and relationships can uncover cost savings opportunities. Consultants should analyze all key contracts to ensure the company is getting competitive rates and identify provisions that may be outdated or unnecessarily expensive. 

There may also be hidden costs in vendor relationships outside of the contracts themselves. Consultants should assess whether vendors are providing value equal to what is being paid and if there are other vendors that can deliver the same services at lower cost.

Establishing Spending Benchmarks  

Once consultants have identified areas of waste and excess spend, they can establish benchmarks for what spending should be based on the company’s true needs and metrics.

Historical spending is not always the best indicator of appropriate spending levels. Consultants can research industry standards, analyze core business drivers and model realistic scenarios to determine spending benchmarks tailored to the organization.

Having validated targets for what the company should be spending in each area provides a guideline for identifying and measuring waste and bloat.

Prioritizing High-Impact Areas

With detailed insight into spending across the organization, consultants can prioritize the high-impact areas that deserve immediate focus. 

Pareto’s Principle often applies, where 20% of the spend categories may account for 80% of excess spending. Consultants should guide the company to tackle the biggest waste areas first to gain momentum and cost savings that can then be reinvested.

Quick wins are important, but consultants must also consider major long-term waste areas even if they are complex to address. A thoughtful roadmap focused on high-impact spending first delivers results.  

Creating a Culture of Cost-Consciousness

To sustain waste reduction, consultants must influence organizational culture around spending. Employees at all levels should be cost-conscious, not just when cuts are on the table.

Consultants can provide training and implement processes to ingrain spending discipline across the company. For example, instituting spending authorization processes, budget transparency, regular waste assessments and incentives for cost savings ideas.

When everyone is empowered and expected to critique spending, it creates an environment of responsible stewardship that surfaces new waste and prevents new excess.

Continuously Monitoring Spend  

Once consultants complete a spending review and reduction initiative, their work is not done. Without ongoing vigilance, waste and bad habits can creep back in over time.

Consultants should implement tracking and analytics so the company can monitor waste proactively. This includes key metrics on spending categories, continuous process evaluation and regular check-ins.

Periodic renewed assessments also keep waste elimination top of mind. Spending optimization should become an integral part of the company’s culture and budgeting processes.

Conclusion

Reining in waste and excess spending requires a rigorous approach across the organization’s people, processes and data. Consultants are uniquely positioned to conduct the holistic analysis and objectively identify cost savings opportunities.

Leveraging the strategies outlined above allows consultants to pinpoint waste, establish validated targets and create lasting cultural change. The savings translate directly to the bottom line, freeing up resources to allow companies to enhance value delivery. Spend optimization should be an ongoing endeavour, not just a one-time event.

By continually eliminating waste and focusing resources on core value drivers, companies can boost their competitiveness and unlock their full potential. Consultants play a key role in identifying and operationalizing the savings possibilities.