How to keep control of your overheads

Today's blog comes from Ian Hopping from Auditel. He provides 6 rules to help reduce overheads, and as a result, increase profits.

When I tell clients about my passion for reducing costs they often look at me as if I’ve completely lost the plot! Procurement, rebates, t’s and c’s, invoices, benchmarking – surely these are not the things of high passion? Well all companies quite rightly celebrate winning new business, but did you realise that if you have a 10% net profit margin then a modest £1000 saving would have the same effect on profits as a £10,000 order! So why not celebrate reducing overheads? Like healthy eating, sticking to an effective cost management regime is not easy, but the benefits can add greatly to your bottom line. So how can you produce long term savings for your company? Here are some rules to get you started:

Rule 1. Check your bills.

Do you check that your bills are correct? Do you check for overcharges and anomalies of usage? Or do you pay without checking because ‘it’s about the same amount as last month’? Have you ever thought that maybe it’s always been incorrect? That the supplier didn’t set up the discount agreed correctly on your first invoice, and it has been the same ever since? That the meter reader has been reading the meter incorrectly (it happens all the time). That you’re paying for someone else’s energy use (much more common than you would think). Would you notice calls to premium rate lines on your phone bill? Or excessive roaming charges on your mobile bill if the total was about the usual amount. Would you know if your staff were ordering items (printer cartridges for example) for their home use? Check your bills….every month. Assume an invoice is wrong until you have proved it is right.

Rule 2. Know what you are using.

It sounds simple and obvious but it is consistently overlooked. When you are looking for a new telecoms supplier, would you be able to tell them who you are calling, when you are calling and for how long? Could you give a stationery supplier a detailed breakdown of the products you purchase and in what quantity? If you don’t know what your usage profile then how can you negotiate best value? A colleague once had the MD of a £5m turnover company proudly tell him that he’d negotiated free weekend and evening calls from his current supplier – well done, but not a lot of benefit to an office working Monday to Friday, 9-5pm! A basic error, but one that illustrates the point well.

Rule 3. Use less.

I know, it’s obvious, but do you actually do it? At the risk of sounding like your father…..

Turn off lights (or install motion sensors so they turn off automatically).

Print and photocopy on both sides of the paper.

Turn off your computers at night, or if they are not going to be used for a while.

Make sure you don’t leave phone or laptop chargers plugged in when they are not charging.

Turn down the thermostat 1 degree. No one will notice.

Use e-mail rather than phone if you can.

Make sure your water cooler is plumbed in to the mains rather than using bottles, and use glasses rather than recyclable cups.

Recycle more. Waste contractors charge about half as much as to empty a recycling bin compared to one that’s contents are going to landfill.

I’ll stop before I bore you with a never-ending list.

Rule 4. Remember that ‘free’ is never free.

‘Free’ never means free, it just means a different way of paying. ‘Free’ chocolates with your stationery are not free. ‘Free’ minutes and texts in your mobile contract are not free. Free iPhones offered as part of a deal to renew your contract or switch suppliers are not free. If you were to ask the supplier ‘how much subsidy is available if I don’t take the phones’ they will put a price on each of those iPhones and you will discover exactly how ‘free’ they were.

‘Free’ never means free (*apart from very, very occasionally).

Rule 5. Read and understand the Ts &Cs.

I can’t stress this enough. If you really can’t be bothered to read all the small print then at least make sure you read about the contract length and the termination procedures. Look out for termination windows that trap you into automatic rollover contracts.  Long term contracts in particular can tie you into uncompetitive tariffs for several years. Put a reminder into your calendar so you don’t forget to terminate a contract and negotiate better rates!

Rule 6. Outsource to an expert.

If you don’t have the expertise, or the time to carry out a comprehensive review of your business overheads, then outsource to a specialist on a self-funding basis, and concentrate your energies on growth. Auditel will review all your costs and if we can’t save you money then it’s completely free*.

 * This is one of those rare occasions when free really does mean free.

Set up in 1994, Auditel delivers highly effective cost management solutions to organisations throughout the country, across almost all areas of business expenditure. Today Auditel has over 3,700 clients nationwide, supported by a network of over 200 cost management consultants.

With the Total Cost of Purchase® process at its core, Auditel’s pioneering approach to accelerated cost management delivers sustainable profit improvement, reduces waste and frees up in-house resources to concentrate on their key strategic roles.

To discover how your company could benefit from a FREE business health check contact Ian Hopping at ian.hopping@auditel.co.uk or on 01825 791128.

If you want to contribute to the Chamber blog, contact us on hannah@brightonchamber.co.uk