A dictionary definition of hidden costs is:
‘when the full cost of ownership is not included in the purchase price, because of additional expenses, opportunity costs, unseen problems or unintended consequences. Hidden costs can make products appear lower priced, easy to obtain or a good value’
When you’re making a purchasing decision consider the full cost of what you are buying.
Let’s take an electricity renewal as an example. You want to get the right price so you’re not just going to accept the renewal note when it comes across your desk. So these are some of the questions you should considered.
How much time has it taken you to research the market?
You need to make sure that you are not only going out to the right suppliers but that you also understand what a ‘good price’ is. It’s a cliché but time is money, so spending time researching the market means less time to focus on your core business
How long did the tender process take?
Not just requesting the quotes and chasing for responses but understanding the replies so you can compare like with like.
Does it come with the right service levels?
This can be a particular challenge if you find something ‘cheap’, there’s usually a reason it’s cheap.
How do you know that the price you’ve been quoted is the price you pay each month?
Once you’ve made your decision and worked with the supplier to get the service installed (more time), how do you know that the price you’ve been quoted is the price you pay each month? To be sure, you’ll need to check your bills each month to make sure you’re not one of the 67% who regularly have mistakes in their business bills.
If you use a broker how much is their commission?
If you don’t know then how can you be sure you’re getting a good price?
It’s a minefield, even something simple like getting an electricity contract can cost you more than you think. If you need help, there are plenty of people out there who will help you but make sure you understand the total cost of your purchase otherwise you could be paying a lot more than you need to.