If you are a CFO or department head, you will likely have to deal with budget cuts as you continually seek improvements in the efficiency and effectiveness of your organization. That process involves tough decisions that can include personnel changes or other expense cuts that affect the quality of your work product and, often, morale within your organization.

There are ways to improve your bottom line or minimize year-over-year expense increases that have minimal effect on your operations. However, many managers are reluctant to address these areas because in their minds they classify them as needs. Also, there may be a general lack of understanding of the expense category and because of this, you are unwilling to challenge the status quo. Therefore, they continue to perpetuate the artificially high level of spending by applying an inflation rate to the expected level of spending from the previous year and continue without a second thought.

A good example of one of these categories of expenses is the telephone. In all likelihood, you are not realizing the maximum impact of controlling your phone bill. Typically, the responsible party in most companies is a procurement agent who will periodically solicit proposals from the vendors that provide these services. They depend on competition between suppliers to keep the cost structure within reason. This assumes that whatever you are currently paying for, you need it! In most cases, this is not the case, but it is not addressed in the proposal process. Keep in mind that all of these providers are trying to maximize their profits. Additionally, you may think that the salespeople representing these organizations are on your side, understand your needs, and make sure you get exactly what you need without over-providing equipment or services. But the fact of the matter is that these people make a living from the commissions they receive for selling you more.

There are companies that specialize in controlling these costs. They understand the structure and composition of the service and offer their services at no additional cost to your company. They perform the service based on a savings contingency and are paid through a part of the total savings they generate. Generally, these organizations have been able to generate net savings in the range of 25% to 35% of total spending. Once the new base spending level is reached, it benefits not only the current year, but future years as well. I’m sure you got the call from the telemarketer offering these services. You don’t respond positively to them because you don’t understand the services they offer. You also rationalize that you bid on these expense categories or that someone else is responsible for the order line. Worst of all, you don’t want to be bothered by more responsibilities or to be judged for past spending levels that were too high.

Another problem is that you don’t see these savings the way you should and don’t focus on the fact that once made, the savings continue year after year. Yes, you have to compensate the company that made the cost reduction savings by paying its share of the gross savings over several years. But on the other hand, if you ignore the opportunity, there is no reduction in the total spending level in the first place. That means your costs continue to rise based on an artificially inflated base cost. Nothing risky, nothing earned.

There are other areas that offer similar opportunities … Energy, transportation, waste management, and potentially copy expenses. There are also experts available here who can help you with the review process. In most cases, they are also offset by the gross savings they make for you. All of these companies try to minimize the workload on you and your staff while maximizing total profit. In effect, these experts are “invaluable”, so don’t miss the opportunity by arguing that you will have to pay them in future years … your base cost has actually dropped.

So don’t leave it to anyone else! Be a starter! Get the benefit of true cost reduction with minimal effort and no moral effort. For a list of companies that provide these services, please contact me at the following email address.