“The Bottom Line” on the trail of the Devil

Here we sit, camped out on the bottom line, increasing our client’s profit by reducing their costs.

An old boss of mine had a favourite phrase which he used over and over again. “The devil’s in the detail” he would spout repeatedly.. in fact, he said it so often that we began to question his sanity but recently I have been found muttering it to myself.

When we first sign a new client, one of the services we offer is a review of their past 12 month bills to ensure that no errors have occurred in billing and to see if any rebates are due. So this week, I have been knee-deep in telephone bills from a well-known provider (rhymes with E.T.) whose billing is always something of an enigma. In amongst the legitimate call data were some very strange numbers… calls which should have been capped were being charged at a much higher rate. This happened for a two day period on three lines.
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The Micawber Principle: Your call to action on costs

“Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery” – Wilkins Micawber (David Copperfield by Charles Dickens).

This famous and much loved quote reminds us of just how fine is the line between two very different states. Mr. Micawber swings between despair at his money problems and cheerful optimism that “something” will “turn up” to save him from ruin – the latter mood generally prevailing after he has eaten a lavish dinner.

In business, however, ensuring that your essential costs are well-managed can be tricky and cannot be left to chance. Cost information must be gathered, analysed, and presented clearly to support good decision making. Detailed market knowledge must be brought to bear at the right time to identify and exploit savings opportunities. A degree of determination and craft is needed to manage the implementation so that the benefits are realised. And, going forward, unless you monitor your bills on an ongoing basis, and keep an eye on the changing markets, guess what happens? That’s right, the costs soon start to creep up again. As Mrs Micawber’s maxim has it, “Experientia does it!” (from Experientia docet, one learns by experience).
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Charities must dust off their “Big Board Talk” to achieve financial sustainability

“No organisation, whether business or charity, will survive difficult economic times without those in charge seriously looking at their financial health, direction and whether they’re making the best use of resources”.

So said the Charities Commission in 2009 when it promoted its “Big Board talk initiative” – the conversation all charities need to have. This covered key areas where charities tell them they are most vulnerable and asked 15 questions to help trustee boards look at both the options and opportunities available to them to help inform their board and planning discussions.

Of course, it is a duty of the charity trustees to ensure that the charity’s resources are protected in order that the charity can fulfil its aims – trustees need to ensure that assets are properly used, that its funds are spent effectively and its financial affairs are well managed; but this is a more strategic and practical take than the guidance to duties set out in “Internal Financial Controls for Charities (CC8)”.
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Creating Sustainable Cost Management Through Outsourcing

In September 2010, Financial Director magazine stated: “Waxing lyrical on building an economic recovery is all very well, but there is a growing belief that 2013 will be the year a second recession kicks in. Which is why cost cutting is not about to go away, a well-worn topic though it is.”

Now this situation is even more pressing.

The recent study of 750 small businesses by the Centre for Economic and Business Research (CEBR) reveals that 78% of small business owners identify rising costs as the most significant threat to their company this year. More than two thirds of firms have seen their profit margins hit by increasing costs over the past three years.

However, KPMG, in their authoritative global survey conducted by the Economic Intelligence Unit, report: “Businesses are under constant pressure to reduce costs, yet many find it hard to do so in a sustainable fashion”. The survey included interviews with senior executives in a cross-section of industries and large, midsize and smaller organizations and experts in the field of cost management. It revealed that 9 out of 10 companies are potentially missing out on major opportunities to boost profits.

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Cost management in “hard core” solution to woo social enterprise investors

Rebecca Birbeck, Deloitte’s director in consulting strategy in her article, “Soft outcomes need hard evidence” (Guardian Professional, Sat 21 January 2012), argues that in order to attract the most investors, social enterprises should balance social impact with maximising profit.

Profit is not a dirty word
Where a social enterprise has the creation of social impact as its primary objective, making profit can be relegated to a poor second. Profits provide a means to sustaining the mission over the longer term, but the statistics show that perhaps only half achieve this with the result that potential investors, ideally seeking both a social and financial return on their investment, are put off. The difficulties for socially minded investors lies in evaluating the social return on their investment when they have only “soft“ outcomes to show and where the wider benefits to society, though compelling, are difficult to quantify.

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Beware the contract rollover

There was an excellent piece in yesterday’s Mail on Sunday (The Enterprise Zone) about White’s Seafood and Steak Bar in Hastings which had received a letter from British Gas the previous month warning that their energy contract was soon due for renewal and that failure to terminate the contract within a 3 week renewal window would see them rolled over on to a two year contract at a kWh rate 47.7% higher than their current contract. With an annual usage of 76,000 kWh this would mean an additional £3,200 a year. That’s an awful lot of fish suppers!

British Gas had, however made an error as the business should have been classed as a micro-business as it has fewer than 10 employees. Legally, suppliers can only roll micro-businesses on to contracts of 12 months at most. White’s has, unsurprisingly, terminated its contract and taken its business elsewhere.

This point aside, the important thing is that the proprietors of White’s actually read the letter that they were sent and acted on its contents. I see so many companies who ignore these letters (and let’s face it some seem to be deliberately designed to look as boring and uninteresting as possible so that they get binned or filed as just another peice of junk mail) and then are startled to discover the new pricing that they are landed with which can include huge hikes in both standing charges and the energy cost. At Auditel, of course, we diarise contract renewals so that our clients never get caught out by this sort of thing.

Burn more gas to save money? (Take or Pay clauses)

A strange question at first sight, however quite a pertinent one due to the warmer than average winter we’re having and the implications this can have for some business energy contracts.

Many energy suppliers, particularly Gas, include in their contracts something known as a ‘Take or Pay’ clause giving pre-determined upper and lower limits that your consumption must fall within in order to avoid what are usually fairly punitive charges. i.e. Take what you’ve contracted for or Pay for it anyway.

The pre-set limits are based on your ‘AQ’ – this should be your average consumption over the previous 3 years or so. However we’ve often found this industry database figure to be wildly inaccurate and should be checked against your predicted consumption before accepting any contract. Your AQ becomes your contractual 100% of consumption and the limits are a percentage either side of this, with the limits differing from supplier to supplier.

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Auditel Tightens The Lady Magazine’s Purse Strings

The Lady Magazine was founded in 1885 by Thomas Gibson Bowles, the maternal grandfather of the Mitford sisters, who wanted to create a “lite” version of Vanity Fair, which he had founded in 1868.Famous for its classified adverts, The Lady remains the first port of call for anyone seeking domestic staff, with vacancies listed for nannies, butlers and governesses. The Prince of Wales and Queen Mother are believed to have used it, and the Duchess of York famously once advertised for a dresser. The Lady is the oldest women’s weekly, and is thought to be the oldest magazine still owned by one family. It continues to operate out of a Victorian building on Bedford Street in Covent Garden, central London.

Ben Budworth took over as Publisher and Chief Executive in 2008. The famous magazine, which since the sixties had been owned by his uncle, was very run down and in desperate need of modernisation. Embarking on a crusade to revitalise this embattled brand, Ben turned The Lady, which had previously been a partnership, into a limited company, with his mother and siblings as shareholders.

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Auditel Make Initial Cost Savings of £266,000 for Soft Drinks Manufacturer

Silver Springs Soft Drinks is the third largest, independent soft drinks manufacturer in the UK, based in Kent. With a workforce of around 140, they produce a number of branded drinks including such household names as Perfectly Clear, 1870 Mixes, Pulsar Isotonic, Fruit Squeeze and Stripes Cola, as well as many own brand drinks for major supermarkets. Formerly, Silver Spring Mineral Water Company, a fourth generation family business, it was bought out of administration in September 2009 and a new management team installed.

With over 200 specialists covering the country, Auditel can deliver its fully independent cost and purchase management services to clients in well over 100 areas of business costs. They were initially engaged by CEO Gary West at the time of the purchase to ensure continuity of the electricity supply for the new company. “Faced with an extremely precarious situation, including the threat of disconnection, a significant increase in security deposit and uncompetitive terms, we were pleased to call upon Auditel’s expertise. Their team worked with us to ensure a successful outcome. In the process they re-wrote the rule book with a major energy provider, establishing a way forward.”

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Businesses can save up to 80% on their energy bills

Auditel, the UK’s premier cost and purchase management consultancy, generate savings for organisations over an enormous range of business expenditure. Last month, they added yet another opportunity to reduce both cost and energy – LED lamps.

The quality and performance of LED replacement lamps has come a long way in the last few years. Their hugely improved light quality and low energy consumption means that businesses can save up to 80% on their energy bills by installing LED lamps in place of their existing halogen or incandescent bulbs.

ENERGY SAVING
In the face of ever-increasing energy costs, companies are searching for ways to save energy. Increasing insulation, upgrading boilers and self-generating power can be expensive and disruptive to the business, often with a slow return on investment. Simply replacing existing lamps with LED is fast, easy and highly effective. For example, a typical halogen spotlight that uses 35W of energy can be replaced by a 6W LED, leading to energy and cost savings of an impressive 80%.

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