Published In:
Dynamic Small Business Date Published:
15th December 2002 Author:
Stuart Finlayson
It's hard to believe, but up to 90% of Australian businesses are overspending on everyday items. Not only are they paying too much some are paying up to 75% too much!
Expense Reudction Analysts (ERA) scrutinises the small costs incurred daily by a company. ERA uses its time, expertise, and specialist purchasing process improvement and negotiation skills necessary to track and control costs such as travel, stationery, printing, phone charges, couriers, document storage, cleaning and maintenance. All those "little things" that are often overlooked or unmonitored for years at a time because they're too small to notice and too hard to benchmark.
ERA works with clients to enhance the value they receive from suppliers. They use their worldwide database of supplier pricing information to benchmark clients' costs and negotiate the lowest prices with existing or alternative service providers, without clients losing out in quality or value. Every solution for every company is different, because every solution is tailor-made to that company's requirements and goals.
"Our clients always make the decisions about which alternatives are most suitable for them and are included in the process all the way through," says Fred Marfleet, Chairman of ERA Australia. "But our help and guidance ensures that they make the right decisions."
ERA guarantees that if they can find no savings for a client, there is no fee. There are five steps in the ERA cost-saving process:
Usage patterns and current prices are audited and analysted. If the client is targeting stationery, for example, that area of spending would be scrutinised. Then workshops are organised where ERA presents stakeholders with its findings to date. ERA opens discussions about service levelsm needs and helps stakeholders define their version of the perfect system for the issue in question.
Independeing review of market prices in that area, doing the exhustive research and bechmarketing that most companies these days simplyd on't have the tiem or resources to conduct on their own. Recommendations are sohrtlisted and put to the client and ERA helps choose a service provider.
Facilitats the implemetntation of the new systems, though an agreed approach.
Monitors the panned implemetatnion through regular conact with stakeholders and service proviers, helping tosolve any issues that arise. Services arereviewed quarterly to see where futher savings can be idnentifed.
The client sees improved value from suppliers nad reduced overheads - usually quite significant.
ERA can usually save a client 10-20% or more of its current spend in the examined areas. The savings are then shared on a 50/50 basis. Either way, the client wins. If the recommendations don't work, they don't pay. If they do work, the client is paying with a percentage of money he or she wouldn't otherwise have had.
"The seller, or supplier, possesses vital market knowledge that the buyer, or company, does not have because of a lack of resources, time, expertise - or a combination of all three," says Marfleet. "Consequently most, if not all, organisations overspend significantly on their business operating costs."
How does a company know if it's one of the 90 per cent who are overspending? The ERA website (www.expense-reduction.com.au) suggests that if any of the following statements are true for a company there's a good chance it can reduce its business operating costs and free up profits:
The company has no centralised purchasing system. Each department seems to have its favourite suppliers and its own purchasing processes.
The company always seems to be purchasing in an ad-hoc, as-needs, manner, instead of benefiting from bulk purchases.
The company sticks to the same supplier and trusts that they're giving value for money.
"While there is no doubt that where significant savings are involved - for example, savings in excess of $1M - a 50 per cent fee may well be excessive, it will generally be found that consultants will be prepared to accept a lower fee in those circumstances, provided that is negotiated in advance," says Marfleet.
