How Do I Combat Rising Costs?

Left unchecked overheads such as phones, fuel, fleet, electricity, gas, print and office supplies can fast erode profits.

Before you can even start to manage and reduce these costs, you need to understand your business’ requirements and know where you are now. The good news is that there are usually quite considerable savings to be made if you know what you’re doing.

Know What You Need

Your aim is to buy, rather than be sold to by the supplier. To do this you need to benchmark your current costs and identify exactly what you require and in what quantity.

• What is the current annual cost?
• Which suppliers are you currently using and what services are they providing?
• Is there redundancy and overlap between services?
• Are you satisfied that your current suppliers are meeting your requirements in full?
• What contracts do you currently have in place and how long are you committed to them?Don’t forget the small print as contract terms and conditions in many of these areas can be particularly onerous.

Understand the Market

 The greater your knowledge the better equipped you will be to obtain the best results. The key is to remember that whichever suppliers you talk to and however good a working relationship you may already have with them, they want to sell you their products. They may attempt to make a business case for their products based on over-inflated cost savings or over-promised service levels.

Once you’re satisfied with your market knowledge and the suppliers chosen, carry out a competitive tender against an exact specification with an exact usage.

Measure Success

Measure the success of the project. Auditing the results on an ongoing basis will not only prove the success of the project and prevent prices creeping back up, but also allows you to monitor changes in usage and keep abreast of your future needs.

Following these principles will almost certainly guarantee savings, which will go straight on to the bottom line.

Over the past 20 years Auditel has worked with more than 5,000 businesses of all sizes in all sectors and we can say with some certainty that a strategic cost management process can deliver improved margins and help companies gain a competitive advantage.

Ian Hopping is a Cost Management Consultant at Auditel UK.

Founded in 1994, the Auditel service was pioneered to help UK companies make effective and informed procurement decisions. Tel:  01825 791128 E: ian.hopping@auditel.co.uk W: www.auditel.co.uk