Can You Afford to Overlook These Simple Cost Saving Opportunities?

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If you’re a CFO or department head, you likely have to deal with budget cuts as you continuously look for improvements in efficiency and the effectiveness of your organization. That process involves difficult decisions that may include personnel changes or other expense cuts that affect the quality of your work product – and often times, the morale within your organization.

There are ways to improve your bottom line or minimize the increase in year over year expenses that have a minimal effect on your operations. However, many managers are reluctant to address these areas because in their minds they classify them as necessities. Also, there may be a general lack of understanding of the expense category and because of this you are unwilling to challenge the status quo. So they continue to perpetuate the artificially high expense level by applying an inflation rate to the prior year’s expected expenditure level and move on without a second thought.

A prime example of one of these expense categories is telephone. In all probability, you’re not realizing the maximum impact of controlling your telephone expense. Typically, the responsible party in most companies is a procurement agent that will periodically request proposals from vendors that provide these services. They rely on competition between vendors to hold the cost structure within reason. This assumes that everything you are currently paying for, you need! In most instances, this isn’t the case but it does not get addressed in the proposal process. Keep in mind that all of these vendors are trying to maximize their profits. Also, you may think the sales persons representing these organizations are on your side, understanding your needs and ensuring you get exactly what you need without providing excess equipment or service. But the fact of the matter is these individuals are earning a living through commissions they receive on selling you more.

There are companies that specialize in controlling these costs. They understand the structure and composition of the service and offer their services at no incremental cost to your company. They perform the service based on a savings contingency and are paid through a portion of the total savings they generate. Generally, these organizations have been able to deliver net savings in the range of 25% to 35% of the total expenditure. Once the new base expense level is achieved, it not only benefits the current year but future years as well. I am sure you’ve gotten that call from the telemarketer offering these services. You don’t respond positively to them because you don’t understand the services they offer. You, also rationalize that you bid these expense categories out or that someone else is responsible for the line item. Worst of all, you don’t want to be bothered with more responsibility or perhaps judged on past expenditures levels that were too high.

Another issue is that you don’t view these savings the way you should and don’t focus on the fact that once done the savings continue year after year. Yes you have to compensate the company that performed the cost-reduction savings by paying their portion of the gross savings for a number of years. But on the other hand, if you ignore the opportunity, there is no reduction in the total expenditure level in the first place. That means your costs continue to escalate based on an artificially inflated base cost. Nothing ventured, nothing gained.

There are other areas that offer similar opportunities… Energy, freight, waste management and potentially copy expense. Here too, there are experts available that can assist you with the review process. In most instances they too are compensated on gross savings they realize for you. All of these companies try to minimize the workload of you and your staff while maximizing the total benefit. In effect these experts are “priceless” so don’t pass up the opportunity on the rationale that you will have to pay them in future years… your base cost has truly been reduced.

So don’t leave it up to someone else! Be an initiator! Get the benefit of true cost reduction with minimal effort and without straining morale. For a list of companies providing these services, please contact me at the email address below.

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Source by Jon C Daiker