Wednesday, June 11, 2008

Managing Budgets and Costs: Life on the other side

In the last few days I had to send emails out as the head of my business unit to manage and control costs. Least to say it was a very interesting feeling as I send the email out. Previously when I used to receive this email from my boss, I used to get sometimes flustered, sometimes found it unacceptable and totally inappropriate. I am sure similar reactions must have been discussed by my team as well.  It is a natural reaction. The  few weeks have been an eye opener in terms of costs and managing budgets. These things are very trivial when looked in isolation but quickly add up to the bottom line. It is funny, as I read in light of the oil prices surge and impact on airlines, that the airlines  are trying to reduce  costs in creative ways. For instance, they are reducing the amount of water they carry in the aircrafts. Their cost reduction economics say that if they reduce the overall weight they carry by 25 pounds they save 440,000 per year. Now for a  given flight it might be an insignificant amount but it is a reasonable cost savings in tough times for the airline. I am sure  there are other ways of wasteful expenditure that can be controlled but sometimes is not seen in the same priority order as others would assume. Anyway, I am quickly learning the dark side of accounting and finance which has given me a new perspective on things. I cannot fully say it is the right guidance framework though the Wall St. and financial world will tell me it is a numbers game. All I am doing is playing a balancing act as of now before I either become a part of the dark side or quit the responsibility.