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Efficient organizations do not wait too long to address inefficiencies and improve processes, Ronald Batenburg explains in his expert blog.
Do you know that feeling of a can you keep kicking in front of you? That important subject you need to deal with, but never get around to because there is always something else going on that is also important, or even more important. Procrastination, in other words. A matter of setting priorities. Naturally.
In the hustle and bustle of everyday life, it often happens that important matters are put on the back burner. You know that things need to change to work more efficiently and save costs, but there is a lack of time or urgency. This phenomenon is known as the 'Cost of Inaction'.
The Cost of Inaction encompasses all hidden costs, both measurable and non-directly measurable, that arise when decisions or improvements are delayed. These can be concrete costs, such as missed savings, but also soft costs, such as lower employee morale or missed opportunities. Its hidden nature means that many companies underestimate the impact or simply do not give it sufficient priority.
But what exactly are these costs? And why can postponement turn out to be so expensive in a business context?
Why is delay so costly?
In cost optimisation, for example, the decision to do nothing is often the most expensive choice. Supplier contracts are automatically renewed, price increases accumulate, and invoices are not thoroughly checked. This financial damage continues to grow without anyone noticing. By the time action is taken, thousands to millions of euros in potential savings have sometimes already been lost.
Many organizations give three common reasons for delaying action:
- “We are too busy.” Understandable, but savings that are postponed are profit that is being withheld.
- "It is not a major expense." Smaller leaks across 10-15 different expense categories can actually result in enormous losses when combined.
- “We do not want to disrupt the relationship with our suppliers.” Often, there is no need to replace a supplier; rather, it is about better contract terms, transparency, and accountability.
Read also: Ronald Batenburg on Spend Intelligence: 'You won't see it until you understand it'
Concrete consequences of postponement
A practical example illustrates the impact. A potential client with an annual turnover of €150 million, with whom I have been in discussions for months, has an annual spend of €7.5 million on one of its cost categories. For this specific category, the average savings potential is 12 percent, demonstrated by various cases from the recent past. On an annual basis, this amounts to €900,000 in costs that can be cut without loss of quality. Year after year. Not by purchasing less, but through more efficient purchasing processes and better contractual agreements.
This situation already existed long before I first entered into discussions with the company. For well over two years, the proverbial can had been kicked forward, and there had been an internal discussion about whether or not to assign a purchasing agent to the task or to engage external support. In this case, the Cost of Inaction was therefore already well over €2 million.
Profit is therefore leaking away because no decision is made to do anything about it. While this client's profit is just 3.9 percent. The decision to actually tackle optimisation would therefore increase profit by 15 percent. After all, reducing costs directly benefits profit from the profit and loss statement, because profit is the result of revenues minus costs.
What can you do to avoid the Cost of Inaction?
1.analyse your expenses: Conduct an analysis of the costs over the past 12 months. Are there categories that have not been reviewed for years? These are candidates to tackle first.
2.Request an independent perspective: Sometimes internal employees are too close to the subject matter to spot inefficiencies. An external audit can provide new insights.
3.Start small, think big: Improvements do not always have to be disruptive. Sometimes, small adjustments to processes and contracts lead to significant improvements.
4.Measure and communicate impact: Quantify the costs of inaction to create support within the organisation. When everyone understands the cost of delay, a sense of urgency emerges.
5.Ensure ownership and responsibility: Appoint clear responsible parties who ensure that savings and improvement plans are actually implemented.
The future begins today
The lesson of 'Cost of Inaction' is clear: efficient organizations do not wait too long to address inefficiencies and improve processes. Procrastination is a silent killer of profitability and growth. Eventually, 'later' unknowingly becomes 'never'. By proactively managing your costs and saving where possible, you create room for innovation, growth, and satisfied employees.
Better to start optimising today than to regret missed opportunities tomorrow. Which can are you kicking forward?
