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Back-office costs outpacing sales across S&P Euro 350

BUDGETS for general and administrative (G&A) functions are increasing faster than revenues as traditional cost management techniques have become less effective, according to advisers CEB.

Research from the member-based advisory firm found that marketing, IT, finance and legal budgets all rose faster than the average 2.1% increase in sales across the S&P Euro 350. G&A spend for marketing was the highest rise at 12.5%, while budgets for IT rose by 6.2% and finance costs increased by 3.6%.

During a presentation at the Economist’s CFO Summit, Paul Dennis, senior director at CEB [pictured], said that G&A costs are changing because “the balance is shifting from a majority of repeatable costs, to many more ad hoc, customised costs”.

In order to manage these new costs finance directors should set G&A budgets based on the complexity of the business instead of its size, while costs should be measured based on the nature of the work rather than on the type of function, Dennis told Financial Director after the event.

“Performance should be measured on how much value is being created and not just on efficiency,” Dennis said.

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