Published In:
National Accountant Date Published:
1st February 2004 Author:
Fred Marfleet
There are countless more to save your business money. Unfortunately, many Australian businesses are overlooking them, or simply don’t have the time to go searching them out.
Buyer’s remorse is not a new idea. You may have experienced it right after a friend revealed he’d paid $100 less for his state-of-the-art golf clubs than you did. But what’s $100 between friends? Better luck next time, you think.
Now consider how you’d feel if the same friend told you he was saving $100,000 a year on running costs for his business. Suddenly, buyer’s remorse takes on a much more serious face.
Cost cutting may not be glamorous, but it is vital to ensure the stability and progress of every business in today’s competitive world. Fortunately, you don’t have to do it by yourself. There are consultants, such as Expense Reduction Analysts (ERA), available to help you manage costs. They scrutinise the ‘little
things' that are often overlooked,and yet add up to big costs - things like stationery, printing, telecommunications, couriers...you get the picture. Once scrutinised, they offer a solution tailor-made to that company.
“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 they make the right
decisions."
To give you an idea of the kinds of things that a company like ERA takes into consideration when investigating a cost-management solution, we’ve put together a list of 50 ways in which your company might cut costs.
Starting with the big picture
1. Centralise purchasing
You may be buying the same goods from different suppliers! Coordinate the spending of different departments to maximise discounts through bulk purchasing power.
2. Cut the paperwork
Request monthly consolidated invoices to improve cash flow and reduce administration costs.
3. Ask for a reason
Don’t accept a price increase without challenge.
4. Get a second opinion
Obtain alternative quotes - on everything. Advise existing suppliers that the business is being tendered, and give them a chance to reduce their prices.
5. Call in a negotiator
Never allow the person in daily contact with a supplier to negotiate price. Use the good cop/bad cop approach, calling in someone else, so that emotion is not involved in the process. This also allows the day-to-day relationship to remain unaffected.
6. A beautiful friendship
Building good relationships with suppliers can result in reductions in costs. Ask them for suggestions on how to improve the way in which you work together. Could ordering weekly instead of daily allow them to reduce their own admin costs and enable them to pass the savings on?
7. Improve cash flow
Reduce your stock levels, and encourage suppliers to hold stock.
8. Review product specification
Ensure that products being used do not exceed requirements. Can you use second-hand pallets for transportation? Recycled toner cartridges?
9. Establish a caring culture
Caring is a pre-requisite to effective cost-management. If staff and executives are complacent, it’s difficult to implement savings.
10. Commit to stamping out unnecessary costs
Lead by example and demonstrate to employees that you care about saving money, even on the smallest items.
And now for the detail...
11. Advertising
Don’t just take their word for it: conduct regular research to ensure that your advertising budgets are being used effectively.
12. About the creative...
Remember that outstanding advertising creative work generally costs no more than ordinary creative. Having said that, ensure that you are not funding the creation of campaigns that win awards, but do not sell your product!
13. Bank charges
Review them regularly - at least once a quarter. Ask your bank manager to suggest ways in which you could reduce them.
14. Competitive banking
While it’s easy to be complacent and leave all your banking in the hands of one institution, it pays to shop around. Many banks specialise in different areas of expertise, and you can use that knowledge to serve your needs - and save you money. Plus, you won’t be fully dependent on one bank!
15. Challenge the manager
When you receive the statement of charges from your bank, take five minutes to consider ways in which the bank has added value to your business. Challenge the bank manager to come up with five himself - and ask yourself whether his list justifies the charges.
16. Cleaning
Ask your staff regularly whether cleaning services are meeting their requirements.
17. Communicate your needs
To ensure your cleaning contract - or, in fact, any contract, meets your needs, make sure the contractor knows what you expect. Let them know if there is a problem - but also give them feedback if things are going well.
18. Couriers #1
Understand how your couriers charge their clients. Some charge per consignment, others per parcel. Work out which service will be most effective for you and, if necessary, switch suppliers.
19. Couriers #2
What’s your courier company’s specialty when it comes to service? Some specialise in overnight delivery, other in international distribution. Use the courier that is most appropriate for the job, as this will be most cost-effective.
20. Couriers #3
Planning can add up to big cost reductions in this area. Timed deliveries are significantly more expensive than next-day deliveries. How soon does it really need to be there?
21. Couriers #4
If you help your courier company by minimising collection and waiting time, you become a more ‘attractive?account, which can be a good negotiating factor.
22. Couriers #5
Look at instigating standard daily courier runs, which can be negotiated over and above the rate card.
23. Expiry can be expensive
Be aware of the expiry date on contracts for services such as electricity, gas, and phone. Suppliers often revert to a much higher penalty rate once the contract expires.
24. Freight costs
Consider handling costs and packing when putting together a consignment. Does it fill one container, or is it made up of several items that can be packed on pallets so that you can minimise transport handling costs and stock damage?
25. Investigate insurance
Allow time to investigate and negotiate your insurance policy before the renewal deadline. Make a note of when policies are due - many brokers wait until so close to the renewal date to contact their clients that they leave little time for negotiation.
26. Know your insurance needs
Have you worked out the latest level of cover you need? Is it more or less than last year? Can you cut out brokers, have your policy repackaged, or cap excesses?
27. Making space
Do not allocate a specific car park to a specific staff member. Have seven per cent fewer car parks than the number of staff entitled to them. On any day, you’ll find that there will be a certain number of absentees - you don’t need to pay for empty spaces.
28. Making the most of fuel cards
Have you reviewed your fuel card system? While most oil companies offer rebates, they do not do so in a directly comparable manner. Some will offer a rebate off the pump price, others choose different bases (eg, area averages) from which to make their rebate. Research will show which will work best for you.
29. Owning the office equipment
Take into consideration the total cost of ownership of your office equipment for the full life of each machine. Consider not only present needs, but future ones, before you purchase new equipment. Will new equipment offer a better, alternative way of doing things?
30. Office supplies #1
Decide on a comprehensive product range and stick to it. Be wary of ‘stationery cupboards? While they may seem an easy way to deal with this ‘chore?item, they cede control of the ordering and stocking to the stationery company.
31. Office supplies #2
Try suppliers?own-brand products. This can reduce costs by up to 40 per cent.
32. Order it back
Request that all staff hand back the unused items of stationery lurking in their desks. You may find that you do not need to re-order for many months!
33. Packaging #1
Standard cartons are much more cost-effective than special-sized ones.
34. Packaging #2
Review your packaging - invite suppliers to make recommendations for cost reduction.
35. Packaging #3
Printed cartons are expensive. Consider using plain ones, and sealing with printed tape instead.
36. Pesty business
Check the hours agreed for pest control services. If the supplier is charging more for after-hours service but using safe chemicals, it may not be necessary to have the services delivered when your offices are closed.
37. Pesty charges
Examine the charges from suppliers who have been in place for some years. Look out for them posting increases without changes in service specification.
38. Postage #1
Clean up your database to reduce returned mail and coordinate your marketing mail-outs to exceed threshold quantities.
39. Postage #2
Investigate alternate methods of information delivery. It may be that your message can be delivered via an alternate method to conventional mail (eg email), and there are companies that specialise in distribution methods to suit your preferences.
40. Printing #1
Do you really need printed envelopes, when plain might do just as well?
41. Printing #2
Always use standard paper sizes.
42. Printing #3
Order larger quantities at one time, but don’t get caught out. If you only need 7000 brochures, it’s still cheaper to order that number at $3.30 per unit than it is to pay for 10,000 at $2.80. Companies over-order to get the price down and then don’t use the stock!
43. Printing #4
One way to get the best out of volume-sensitive ordering is to print the items that require the same paper stock at the same time.
44. Records management
Don’t continue to pay for the storage of boxes simply because you haven’t worked out whether you need to keep them. Review!
45. Telecommunications #1
Be aware of flag falls or connection fees per call, and your call duration, when assessing telecommunications contracts. Most businesses have low call durations, which means the flag fall is a large part of the cost of the call.
46. Telecommunications #2
Treat loyalty discounts with caution. They usually apply to eligible calls only and amount to very little on your total bill. Check the fine print.
47. Telecommunications #3
Have you achieved any real savings on your phone bills over the past 12 months? How many lines do you really need? Asking yourself some questions can save you a lot of money.
48. Travelling light
Savings can be found in managing your travel well. Avoid last-minute bookings - you can save more than 30 per cent by booking weeks, not days, in advance.
49. Travelling often
If you or your staff are using a lot of hotel rooms, look at negotiating a better rate with one hotel chain.
50. Workers Compensation
Be aware of the rollover date on your workers comp insurance. The time to review the level of premium is before it falls due, not afterwards!
Making real changes
There’s a lot of food for thought in our list, but even more in this fact: experts estimate that 90 per cent of Australian businesses are overspending on day-to-day expenses - by as much as 75 per cent! Are you one of them? ERA suggests that if you answer ‘yes?to any of the following, there’s a good chance that you can reduce business operating costs and free up profits.
YES/NOThere is no centralised purchasing system.Each department has its own favourite suppliers and its own purchasing processes.
YES/NO We always seem to be purchasing in an ad-hoc, as-needs manner.
YES/NO We seem to stick to the same supplier and trust that they’re giving us value for money.
Got a yes or two in there? Don’t be disheartened. In fact, look at the positives: chances are there’s heaps of money to be saved within your company. Give ERA a call to find out how - and how much! ERA is an independent cost management consultancy and works on a ‘no savings, no fee?premise. If they don’t find any savings for you, you pay nothing. You have nothing to lose - except a lot of unnecessary costs!
