Audit Your Expenses to Boost Profitability
One of the easiest ways to boost profitability is to cut unnecessary expenses or to save on the necessary ones. The former might seem fairly obvious, but did you know that there are consultants out there to help you with the latter, and that they often don’t ask for pay unless they’ve returned results? Let’s talk about how they do it.
Enter Cost Analysts
There are companies whose entire business consists of finding cost savings. They don’t often don’t charge an upfront fee, but rather, take a percentage of the savings for a set amount of time in exchange for their work.
Generally what they are going to need are your invoices and any contracts or agreements you may have signed with various service providers. They will then audit these invoices to make sure you’re getting charged appropriately and, if necessary, renegotiate for better rates. Errors and overcharges happen all the time; most business owners simply don’t have time to put forensic-level attention on monthly bills.
Where Can I Find Savings?
There are lots of places to save, starting with a place you might not expect: your bank. We’re the first to tell you about the importance of developing a banking relationship but sometimes a cost analyst can give you context you wouldn’t otherwise have.
In one case study we examined, a client had absolutely no desire to change banks but was told they were overpaying fees to the tune of $32,000. When the client went to the bank with the report from the cost analyst, the bank offered to reduce the fees by $9,000. The cost analyst then gave the client the report that showed the bank was not charging market rates given the existing relationship. They changed their tune and came close to a $30,000 total reduction in fees.
Another well-known place to find savings is with shipping. Freight auditors have long studied freight and shipping bills to make sure packages and shipments arrive on time and if those shipments did not arrive on time, to demand the refunds that are part of the shipping agreement.
The possibilities are endless: office supplies, cell phone bills, waste management, cleaning services, merchant fees, utilities, even your real estate leases.
Why Use Professionals?
Well, just like anything in life, you can opt to do something yourself, but do you really have the time or expertise to audit all your bills? As we mentioned above, most of these types of businesses don’t charge an upfront fee and only take a percentage of savings as compensation for their work. Once that’s repaid, you’re left with the savings and the experience to make sure that you continue to keep an eye out on all your commitments and contracts.
There are plenty of good firms out there but two that we’ve heard good things about are P3 Cost Analysts and Expense to Profit. Both boast glowing customer testimonials and millions of dollars saved.
These are the decisions you can make now to make your business that much more profitable in the short to medium term, and that much more valuable when you decide it’s time to exit.
Looking for some help to get started identifying places where you can save? We’d love to look over your financial statements with you. Give us a call today.
