Compass Financial Consulting

"Yes, absolutely this can be an issue, and I see it all the time. E.g., a new R&D project manager comes on board and procures some kind of a license; he thinks it will help reduce project time, or whatever. In 10 months this person leaves and new project manager does not use it, or may not even be aware that such tool exists."

Alec Gurwitz, CFA at Compass Financial Consulting, LLC

Worst case scenario – procures a similar kind of tool from somewhere else. And, of course, subscription fee keeps on renewing. Same with marketing, sales, etc., they subscribe to various kinds of industry research, services, databases, etc.

From the internal perspective, the best way to address this issue is to implement zero-based budgeting approach. As I am sure you know, typically, in a planning process, management takes prior period numbers, use it as a base, and usually adjust them upwards.

Under zero-based budgeting, each line of biz owner should start from a blank page. That person needs to elaborate on each $ line in the P&L, why it is needed, what biz purpose it services, ROI, etc.

Any type of services, a subscription that is still active, but not on this zero-based budget list should be immediately eliminated.

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