The following case study shows how an inefficient accountant made it difficult for management to identify and reduce costs within the business. When budgeting, the client applied a % increase to expenses, based on the previous years expenditure, resulting in the inability to review costs.

Improcus introduced zero based budgeting for all identifiable expenses.

Having established the real cost base of the company, management were able to achieve an immediate reduction of 20% per month in costs, without any impact on the performance of the company. When a reduction in trading required a reduction in costs, management had accurate data to hand.

The client, a supplier of parts to the automotive industry, supplied parts for luxury and standard models of vehicles. Management perceived that the price of the parts that they supplied to build the standard range were too low.

Improcus conducted an activity based costing exercise on all products, by customer.

Profitability by product and by customer identified that the standard range subsidized the luxury automotive products. The traditional costing of the products had failed to identify hidden costs in the business, such as increased inspections and higher reject rates for the products for luxury models.

As a result of the study, a price increase was achieved on the luxury products. Had the client increased the price on parts for the standard models they could have lost this business to another supplier.