COST AWARENESS

1. COST AWARENESS EXL SERVICE CONTACT CENTER COE

2. At the end of this module you will able to: Explain the terms Revenue, Cost, Profit and Loss Identify the elements of a basic Profit and Loss statement Identify the costs in a BPO/ BPM Explain how the costs can be controlled in your scope of work

3. Introduction to Sabu Hello! I am SABU SimplyAmazing @ BUsiness Managing Finance is the key to run a successful business Concepts surrounding money are quite interesting once you get understand the basics • We will start with exploring basic terms such as Revenue, Cost, Profit and Loss

4. Cost Awareness Just like you, I too am quite aware of the role that money plays in my life I earn a certain amount, and I need to make sure that my expenses do not exceed that amount I know that if I do well at my work, I can increase my earnings over time. That will help me improve my lifestyle. But I will still need to ensure that my expenses do not exceed my earnings. Its exactly the same with companies. They too have revenues and expenses. Lets see how it works.

5. Basic Concepts Some basic terms: Revenue, Cost, Profit and Loss

6. Revenue, Cost, Profit and Loss • Revenue is the amount of money earned • Cost is the amount of money spent to earn the revenue • Profit or Loss is determined by subtracting the Cost from the Revenue

7. Profit and Loss Statement How do you know if a company is doing well or not? You can answer this question by looking at a company’s profit and loss statement. A Profit and Loss statement defines a company's ability to generate profit by increasing revenue, reducing costs, or both It is a financial statement that summarizes the revenues and expenses (costs) incurred during a specific period of time

8. Profit and Loss Statement In its most basic form, this is what a Profit and Loss statement looks like In this example, we see a profit. If it was a loss, we would have seen -200 or (200).

9. What is Revenue? Revenue is the income that a business earns from its normal business activities, usually from the sale of goods and services to customers. A grocery store, or a retail store, earns its revenues by selling certain items (known as goods) to its customers. A restaurant earns its revenues by serving food, and providing a proper ambiance to its customers. A school too needs to earn revenue. A private school would earn its revenues through students’ fees.

10. What is Revenue for a BPO company? A BPO Company earns its revenues by helping clients manage certain aspects of their business. BPO companies can manage a variety of processes for the clients as shown here.: Finance Customer Care Market Research Payment Services Translation & Localization Human Resources Data Processing Content Development Clients pay when the BPO companies meet requirements as specified in their contracts. These requirements are known as Service Level Agreements, or SLAs. • SLAs can be set on a number of parameters. E.g. • Processing a set number of calls or transactions • Meeting a required AHT/ APT/ TAT • Meeting a Quality/ Accuracy threshold

11. What are Costs? Cost refers to the money that has been used up to produce a product or a service. For example, a grocery store first needs to spend money to stock up on groceries. A restaurant needs to first purchase raw material, hire an train staff etc. before it can serve customers. Costs are of two types: For example, cost of groceries and other food items would be direct costs for a restaurant Cost of advertising would be an indirect cost for a restaurant.

12. What is Cost for a BPO company? Here are examples of direct and indirect costs for a BPO company: Without these, it would be impossible to meet client SLAs such as handling calls, emails, etc. While these are necessary, they are not directly involved in ensuring the SLAs are met

13. A More Detailed Profit and Loss Statement Lets take a look at a formal view of a profit and loss statement We start with revenue at the top Next comes the direct costs These are the key direct costs in BPO companies Next comes a very important item called the gross margin. It is calculated by deducting direct costs from the revenue. Then comes the indirect cost Here are some common indirect costs The last item is yet another important number called the profit before tax. It is calculated by deducting indirect cost from gross margin

14. A More Detailed Profit and Loss Statement Lets take a look at a formal view of a profit and loss statement Revenue is the like blood flowing through our veins. Without revenue, no company can sustain itself. Therefore, all top leaders are very concerned about this number. Direct costs are directly controlled by operations. Therefore, Gross Margin is directly impacted by their actions. That is the reason why Gross Margin is one of the most important financial parameters for BPO operations teams. Profit before tax is a measure how financially efficient the entire BPO company is (not just operations). CEOs would be very concerned about this number.

15. Check Your Knowledge Its Quiz Time

16. Properties On passing, 'Finish' button:Goes to next slide On failing, 'Finish' button:Goes to next slide Allow user to leave quiz:After user has completed quiz User may view slides after quiz:After attempting quiz Show quiz in menu as:Multiple Items Edit in Quizmaker Edit Properties

17. Managing Costs Lets explore how costs can be managed to improve our Gross Margins

18. How can Operations Reduce Costs? • Do more with existing staff • Improve the process so that time spent on certain steps is reduced • Work on First Time Right so customers don’t contact us repeatedly for the same issues

19. What happens when Costs are not Managed? The market is competitive, and every company aims to be more efficient that its competitors. This means, they must constantly manage costs. Companies that don’t manage costs well, will eventually lose market share and will shrink or go bankrupt. This will have the undesirable effect of people losing jobs. Imagine if all the companies in the industry were inefficient. Then such job losses can occur at a nationwide scale, and jobs would move to other countries. Therefore, to stay in the field, companies do several things to reduce cost

20. How do BPO Companies manage Costs? There are two key strategies that BPO companies can use, to manage costs.

21. Your ability to influence costs What can you do to influence costs?

22. What can you influence internally? The cost management methods we have discussed so far was at a company wide level Did you know that you can also influence Cost and Revenue at your level? Let us see how

23. What can you influence internally? Analyse This! Ensuring designated work hours are used for work related activities only When you are working, ensure you are as productive as possible by ensuring your process your calls or transactions faster without making mistakes

24. What can you influence internally? Are you….. Present and ready to work for the duration of the shift? Available to do Productive work Excludes breaks, training, meetings? Talking with customers, working on transactions, etc.? Following the required processes?

25. What does it Mean to you? You should…. Login on time, avoid unplanned absences Adhering to break schedule Avoid Extended Hold, ACW Be updated on Process/Product, Efficient System Navigation

26. Knowing how much you Contribute Take a look at the pie chart below. It represents the work done by an employee in an 8 hour work day (it excludes breaks). How do we measure his contribution? The Employee was processing calls or transactions for 5 hours. It also includes other productive work e.g. coaching, training etc. He was available for work for 2 hours, but there was no work that came to him. So, he was waiting. 1 Hour of his time is unaccounted for. We don’t know what this time was used for.

27. Knowing how much you Contribute His contribution can be measured with two metrics (a) Utilization and (b) Occupancy. Read on carefully…. Total Processing Time + Available Total staffed time = Total Processing Time Total Processing Time + Available =

28. Knowing how much you Contribute Here’s how we can calculate the occupancy and utilization for the employee below: Total Processing Time + Available Total staffed time = 5/(5+2) = 5/7 = 71.43% Occupancy = Total Processing Time Total Processing Time + Available = (5+2)/(5+2+1) = 5/8 = 87.5% Utilization =

29. What does high or low occupancy or utilization mean?

30. Knowing how much you Contribute Ensuring you are present at work, logging in on time, maintaining your productivity and quality, adhering to break schedules etc. go a long way in managing costs. Both Utilization and Occupancy are key to keeping costs low and you play a big role in this As you progress in your career, each level comes with a different set of requirements which you need to consider when influencing Cost or Revenue

31. Knowing how much you Contribute To conclude, each of you play a huge role in contributing to the components in a Profit and Loss statement. When Cost is managed well, it results in more opportunities for growth across the company. • Let us work together so we can grow together This eventually means more jobs, and several other opportunities for employees!

32. We learnt to: Explain the terms Revenue, Cost, Profit and Loss Identify the elements of a basic Profit and Loss statement Identify the costs in a BPO/ BPM Explain how the costs can be controlled in your scope of work

33. Check Your Knowledge Its Quiz Time

34. Properties On passing, 'Finish' button:Goes to next slide On failing, 'Finish' button:Goes to next slide Allow user to leave quiz:After user has completed quiz User may view slides after quiz:After attempting quiz Show quiz in menu as:Multiple Items Edit in Quizmaker Edit Properties

35. THANK YOUThe End