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7 days & 7 Tips for saving the small costs – Small Leaks can Sink a Big Ship

By 7th June 2011February 15th, 2022No Comments

 

 

Posted by: David Powell

By now most companies will have cut the large costs i.e. new projects, staff etc that they needed to do to get them through the recession.

Managing Directors, Finance Directors and Owner Managers are now gearing themselves up for the recovery and although they’ll, of course, have a keen eye on the costs their main focus is likely to be increasing revenue and identifying new opportunities.

1) Energy Market Timing

There are many complicated areas in energy but the biggest saving, by far, is timing the market correctly. You can easily save some money by simply calling a few energy companies for quotes, but make sure you are comparing apples with apples e.g. are they using the same number of kilowatt hours per annum and make sure you are not jsut comapring the headline pence per kWh, remember to include all the elements of cost.

In most circumstances you have a 4 month window before your contract end date to renew for the next year (or more) and in that window prices fluctuate wildly, so the biggest saving is by monitoring what the market is doing on a daily/weekly basis and picking when to lock in your contract.

Other smaller savings can be had by checking you have the correct meter type and profile e.g.a distribution company using an old manufacturers shed may be on a meter that is too ‘large’ for it’s needs and hence paying over the odds.

2) Energy Contract End Dates

Much the same as for Electricity with market timing, but you can hedge your market bets by ensuring that there is a large gap between the renewal date of your Gas and electricity contracts. i.e. if both your Gas and Electricity had ended in the summer of 2008 and you were therefore forced to renew both contracts, you would be stuck in for at least one year on extremely high rates (double what they are now). However if you had say a 1 year gap between your contracts, only one of them would have locked in at the peak of the market.

3) Spreading the Cost

In Gas particularly the standing charge element can be very beneficial for companies, but also very expensive if they get it wrong. If you can reasonably accurately predict your annual gas consumption, e.g. it’s in the same ball park year on year or it correlates directly with your turnover rather than the weather, then it can be to your advantage to have a very high standing charge and a low price per kWh, this means that you won’t get a huge winter bill for gas heating and a low or non-existant bill for minimal summer usage. Hence you can effectively smooth the cost of your gas over the year. However if your usage is much lower than you anticipated this type of high standing charge contract can be very expensive compared to a no standing charge contract, so it needs careful consideration.

4) Free is never Free

Take mobile phones for example – a company might be offered 20 new iPhones “free” as part of a deal to renew their contract or switch suppliers. However if you ask “how much subsidy is available if I don’t take the phones” you can put a price on each of those 20 free phones. If you don’t need new phones now then you can buy them later from the subsidy or from another company or even secondhand.

You can apply the same logic to “free” smart meters, “free” chocolates with your stationery etc etc

5) Always read the small print

BT for example currently has a deal where you can get the large majority of calls to landlines & mobiles calls bundled into the line rental and it even offers to include 0845 & 0870 numbers in as landline calls. However after new regulations introduced last year many companies are switching away from 0845 and 0870 towards 0844 and 0871 instead and these aren’t bundled into the deal on the BT offering. The unlimited plan also has a fair usage policy meaning that you only get 300minutes per line to mobiles. Hence it needs careful analysis to determine whether this plan would be cost effective for your company. I’m not singling out BT as many telecoms companies have similar plans with small print clauses that add to your cost.

6) Just because it’s the same as last month doesn’t mean it’s right.

Accounts departments are not experts in all areas of cost in a business, so if an invoice is usually say £2k per month then as long as it comes in that ball park it will get paid without too detailed a check. However what if that invoice should actually be £200 per month because when the supplier set-up the billing/contract a decimal place error was made? This can happen and does happen and substantial refunds can be had.

Remember suppliers are only human as well and they will have flaws in their process’s as I’m sure you do, just make sure your company isn’t the one paying for your suppliers flaws.

Like the above we are currently auditing a x10 error for a client – the new FD spotted a x10 error himself and after a few months arguing with the energy company got a round £80,000 refund then called us in. We are now doing an audit with knowledge and think that there is substantially more to be refunded.

7) Do an audit – some questions to ask

By getting someone internal or preferably external to take a detailed look at specific areas you can get an objective look at what you are spending and you’ll be surprised at what you find. The below are just a few real examples:

  • Are the yellow folders favoured by one branch more expensive than the green folders all the other branches use?
  • Are all the ink and toner cartridges for models of printers your company actually owns or are the staff ordering cartridges for their home printers?
  • Do you know how many DDI’s you have? & Do you know what all your lines do (or don’t do!)?
  • Does the buyer communicate with the accounts department – I’ve just found a company that is buying toner at extremely good prices BUT almost every time they use Google to get the best price that week so the accounts department had over 200 invoices per year for many many new suppliers to set-up and process, by tendering the annual usage not only was the price reduced but the accounts department now only has 12 invoices to process which is a huge admin saving.
  • Are you paying for next doors gas or electricity? If you are a sizeable refund may be available.
  • As text messages are typically non-business how many texts are staff sending in business hours. I’ve identified a client with one user who sent 6000 texts in 3 months to just one number, that’s 1 every 10minutes for every waking hour 24/7. If that was someone spending that much time texting a friend then they are not being productive at work. In this case it turned out to be a child of a director and with a unlimited text bundle on the account the real cost was marginal but I’ve seen less extreme examples with employees.

There are a 1000 more questions that could be asked as part of a proper audit of your overheads. Give us a call and let us audit your overheads, it costs you nothing except a couple of meetings and we get paid as a share of any savings we find.