Start 2015 as you mean to go on by cutting your business’s costs…..
Over the last two years, I’ve offered advice to early years providers seeking to manage their overhead costs. In 2013, I looked at energy, telecommunications, waste and consumables; in 2014, I concentrated on the key cost areas of energy efficiency, water and IT, as well as focusing on the strategic areas of benchmarking, supplier management and negotiation, and the mean, lean and green approach to purchasing.
To help you start 2015 on the right foot, here is a summary of my key suggestions so far:
Energy & Water
- Energy costs are always volatile, but the underlying pressure comes from increases to funding for upgrading the UK’s energy infrastructure. The government’s ESOS initiative, which requires larger businesses to complete a comprehensive energy audit by December 2015, will affect some of the larger nursery chains. Regardless, every setting can reduce its costs by using more efficient lighting and heating equipment and dentifying hidden sources of energy waste.
- Every drop of water is precious, and a water audit can identify the usage and equipment used, highlight leaks and compare consumption against ‘standard usage patterns’. In 2017 competition in the water industry will be introduced in England.
Information Technology is the best ‘ology’ to improve performance. Undertaking an IT project requires thorough preparation to identify the functionality required. You must select the most appropriate software and hardware, negotiate the licence and support arrangements, and complete testing and
implementation. A successful project can reduce operational costs, free up staff time and provide better information to parents.
Benchmarking & Supplier Management
- Benchmark your nursery to achieve best practice – this involves reviewing the costs, processes and resources you use. By looking at each activity within a nursery, comparisons between settings can identify savings opportunities. Comparing performance levels against competitors can help establish ‘best practice’ and improve the effectiveness of your organisation.
- Getting the best out of your suppliers involves understanding your purchasing requirements. Identify the ideal supplier, undertake a competitive tender and keep a close eye on performance. Parallel to this is finding the middle ground in negotiation to achieve a mutually agreeable outcome.
Negotiation is initially about preparation and planning, then looking for the best match from a cost and service perspective.
Mean, Lean & Green
It is important to continue to press down your overhead costs and ensure that you are obtaining ‘best value’. Strike the right balance between cost, quality and service – there are three steps to this approach:
Mean: Minimise your costs by smarter purchasing.
Lean: Understand every aspect of your usage and consumption: not just energy and utilities but also your consumables spend.
Green: Look for the environmentally friendly solutions that are available, from renewable energy to recyclable products and the services you procure.
During 2015 I shall be finding more areas where costs can be reduced, as well as taking another look at some of the key overheads.
The article “Money Savers” was first published in Teach Nursery Magazine.