Following a shift in strategic priorities from pre-pandemic times, effective cost allocation is emerging as a priority, with 55% of Asia finance leaders rating cost allocation as important in supporting current priorities, a survey by Ernst & Young (LLP) notes.
In its survey released on Nov 27, which surveyed more than 90 finance leaders across Asia, EY found that finance leaders are currently focused on revenue growth, business agility and long-term value.
This is in comparison to the pre-pandemic priorities of cost efficiency, revenue growth and enterprise and regulatory risks.
Ronald Wong, EY Asean financial accounting and advisory services leader, says: “Cost allocation is a crucial component in finance transformation, especially for companies focusing on revenue growth.”
“Effective cost allocation provides transparency into the true costs associated with various business activities, allowing finance leaders to identify areas where profitability can be improved,” Wong adds.
However, the survey found that only a third of respondents (31%) are in the process of finance transformation.
See also: Labubu dethrones Taylor Swift for fifth place among top searches on Carousell
The top challenges faced by Asia finance leaders in their finance transformation journey were change management (39%), finding the right implementation partner (26%) and creating a business case to obtain funding (25%).
According to the survey, the four key challenges that companies face in successfully managing their cost allocations are process, data, technology and people.
For process-related challenges, the survey found that operations-based cost allocation processes are used by more than 55% of surveyed organisations, highlighting the importance of understanding physical and service flows.
See also: 68% of Gen Zs not confident in maintaining good physical health in old age: Prudential
With regards to challenges in integrating cost allocation into current processes, the two key concerns shared by almost half (49%) of the respondents were data related.
The first concern is the availability of operational or volumetric data (29%), and the second is the integration process that demands the availability of accurate and relevant data points (20%).
For data-related challenges, the survey found that more than half of respondents believe that the lack of clear information, specifically visibility (35%) and traceability (30%) of the cost incurred as a significant challenge.
Additionally, only 20% of respondents are satisfied with the granularity od the data.
For technology-related challenges, the survey found that 50% of respondents are still relying on spreadsheets for their cost allocations. As such, 70% rated their current cost allocation process as manual and tedious with many errors.
With regards to people-related challenges, 31% of respondents noted that getting the required information was a significant barrier, highlighting the reluctance among employees to share data or information needed for cost allocation.
