5 Cost Reduction Ideas for Thrifty Business Owners
Aaron Stahl / Cost Reduction / June 13, 2019
Good businesses are constantly looking for ways to save money and improve their bottom line, and most business owners would love to do that without having to cut employee pay or benefits.
If you’re looking for non-payroll cost reduction ideas, here are a few below.
Almost every business has waste and/or recycling expenses. These costs can add up dramatically at high volume or multi-location businesses. Furthermore, these costs have been rising at one of the highest rates per the government statistics.
As a result, waste haulers are relying more on ancillary charges to boost their bottom line. A litany of fees can dot even the simplest of waste bills.
These fees can range from: fuel, environmental, overage, extra yardage, container maintenance, recycle recovery charges, franchise fees, delivery, exchange, swap out, snapshot, regulatory cost recovery, etc. The list goes on.
Changes to recycling markets in recent years have also drastically changed the cost structure and landscape.
A waste management audit will determine what fees, costs, services, and recycling programs are valid and necessary for your business in order to help drive down costs in this expense category.
Think of a utility audit as forensic accounting applied to your natural gas, water, sewer, and electric bills. There are hundreds of tariffs and calculations that go into arriving at what your costs are each month. How do you know which ones are right and what you should be paying?
Furthermore, any time there is a human involved there is a chance for an error. In our experience, we’ve found that over 95% of businesses have at least one invoice that contains a billing error. This can result in significant refunds as well as large and ongoing monthly savings.
One example would be a misapplied tax on your invoice. If you identify one of these, keep in mind in many states the vendor should refund these back to the point of error. Do not accept a 3-month credit or even the state statute of limitations (typically 3 years).
These issues can take months of follow-up with many roadblocks being thrown up by the vendor, but if your case is valid the effort is often worth the refund you are owed.
Consider conducting a telecom audit. Telecom expenses can spiral out of control over time. You should really audit your telecom expenses every single year. If left unchecked you will find overcharges, incorrect charges, and a myriad of services and lines you do not use.
Request a copy of the Customer Service Record from your vendor (you will likely need to submit Letters of Authorization with entity EIN #’s and account numbers to complete this request).
Here is an example of a very simple telecom customer service record. Depending on the complexity of your organization these customer service records could be hundreds of pages in length.
From here you will be able to determine exactly what you are paying for and where the lines you are paying for go to. This is the only way to verify the accuracy of your telecom expenses and look for errors and overcharges.
Managing and staying on top of the various vendor contracts, expiration dates, rebates and promotions, and market rates can also yield substantial savings.
If you accept credit cards and receive more than $100,000 per year via credit card transactions you should be monitoring these statements each month through a merchant processing audit. There may be significant savings hiding in the additional charges you incur.
Most business owners know credit card processing and charges well enough to know there is a fee associated with each transaction, and most are effective at getting a very reasonable base fee for that transaction.
80% of the savings we have historically identified come from the ancillary charges associated with taking credit cards. These charges can cost our larger clients tens of thousands of dollars each month in unnecessary fees.
If you are spending significant money in this expense category it warrants a close look and ongoing monthly audits.
Consider conducting a property tax audit. Each time your property comes up for assessment the county has the opportunity to raise or lower your assessed value.
This can result in giant swings in your tax bill and as a result, giant swings in the net value of your property (and cash flow).
You should take time to look into these charges and assessments and see if there is an opportunity to appeal.
If you do decide to appeal the taxable value you will want to make sure you are armed with market data (both market comps of comparable properties as well as other comp data (a local appraiser should be able to assist you here).
Be sure to apply as soon as the appeal window opens too. Most counties allocate a certain amount each year to reducing assessed values. Once that amount runs out it may be more difficult to win an appeal, even if your case is just as strong.
These are just 5 ideas for non-payroll cost reduction to get you started.
If you decide you want to employ professional help we’d love to help out. We’ve helped thousands of clients across the country save money with our risk-free, shared savings audits.
You can call us today or send us an email to get started.
