Three minute read.
Every business wants to reduce indirect costs – there’s no doubt about that – but often that’s easier said than done. Especially when you consider that ‘savings’ from bulk buys, trade discounts or repeat purchases generally come with an (often hefty) outlay attached, or negative terms and conditions embedded in a contract.
It is possible to free up more cash for your business without having to cut down on your usual purchases and without having to change suppliers, invest in new systems or technology, or compromise the quality of the products or services you’re used to.
In other words, no need to cut your budgets or make changes to the way you do business.
The trouble for most companies of course is that they can’t find the time, experience and resources within their businesses to firstly identify where those overpayments are being made, and secondly negotiate their way to better deals for every purchase they make.
Are you paying for billing errors?
Making cost reductions isn’t just about getting the best deals – billing errors are common, and any supplier (no matter how long you may have known them) can make mistakes. In fact, it happens more often than you might think.
How much these billing errors will end up costing you boils down to how long it takes to spot them. Sometimes it can take years and something that looks minor on paper soon adds up. While spot checks can be useful, they aren’t enough. Invoices and management reports often need to be reviewed to a forensic level and it’s not just about frequency or unit errors – billing errors can manifest as things such as non-agreed surcharges, missing discounts, duplicate charging or price creeps.
These are rarely insignificant sums; for a previous client I uncovered a billing error of £62,972 which led to total negotiated savings for the company of £109,230 pa.
And this isn’t a one-off. Typical total negotiated savings examples for previous clients include a £13,631 refund for incorrect minicab tariffs for a publishing company, a £29,469 refund for electricity standing charge errors for an advertising agency and £11,659 in mobile phone tariff errors for a medical research company.
Save enough to pay the equivalent of an employees’ salary for a year
Right now you will be spending more than you need to on your general overheads. No matter how long you’ve been with a supplier and how often they tell you you’re on their best rates, there are always savings to be negotiated.
Consider your current vendor costs for a moment – energy bills, mobiles, telecoms, couriers, postage, business insurance, stationery, contract cleaning, PMI, you name it, the list goes on! With 30 years cost reduction experience I can safely say that the chances are you are paying more than you need to for these services.
Your office manager may be too busy with other responsibilities to look into your billing and tariffs at a forensic level, but that doesn’t mean missing out. Instead, get someone else to do the work for you – I operate on a no-saving, no-fee guarantee with no upfront costs, so there really is nothing to lose, but significant savings to gain.
Taking care of cost reduction in-house is not easy. Doing the groundwork to collate the data, analyse and benchmark the numbers, check supplier service levels and negotiate and implement new deals is a time-consuming task. It also takes a lot of skill, resource and experience in what can be a divisive and opaque market, where sellers are trying to make up margins lost over the last few years.
Get it right however and you could be looking at savings that have a significant impact on the budgets you have to work with and your company profits as well. After all it is not uncommon for my clients to achieve cash savings equivalent to an employee’s salary.
Keep the relationships you’ve built over time with suppliers intact
When I speak to clients about cost reductions often one of their biggest concerns is that the supplier relationships that have been nurtured and built up over time will be negatively impacted.
Usually, making cost reduction savings does not mean you need to change suppliers. Even better, it doesn’t mean your relationship with your supplier has to suffer either. Your suppliers want to keep your business so generally costs can be negotiated with existing suppliers just as effectively as with new ones, and it’s important to protect and nurture those relationships you have built up.
If you’d like to find out what kind of cost savings you could be making for your business, I’d welcome a conversation with you. An initial exploratory discussion will only take 20 minutes of your time to get a good understanding of the type and scale of savings you could make. For more details just get in touch.