Industry Report: Lowering the cost of business

Controlling costs could allow your business to realise untapped profitability. Chris Allison, Managing Director of Auditel (UK) Ltd, provides an insight into the cost management industry

There's no getting away from it, businesses are expensive to run and yet organisations throughout the UK and Ireland are paying much more than they should for their essential business costs.

Few have the time or resources to track every invoice, question every charge, or stay abreast of this fast-paced marketplace. This means many never take full advantage of the cost-saving opportunities that exist. As a result, billions of pounds are wasted every year in unnecessary expenditure. When reviewed and managed correctly, a proportion of current spend could be dramatically transformed into valuable profit.

Over the past few years, companies have faced increasing pressure on their profit margins and have significantly reduced costs and staff in an attempt to survive and remain competitive. However, major areas of expenditure in which savings were historically limited are communications, energy and water.

These services and many others, including finance, facilities management and premises overheads, are all expected overheads for any business. All need frequent review to ensure they remain cost-effective. Many organisations do this themselves, but rarely have the time or expertise to carry out these exercises on a wide enough scale, let alone on a regular basis. Often, confusion leads to staying put and lying low!

How important is it to cut costs?
Consider a company with a gross profit margin of 25 per cent, making a saving of £100,000. Making an equivalent profit through day-to-day operations, that company would have to generate £400,000 in additional sales! Try that on your Sales Manager on a Monday morning...

The way ahead
Outsourced help is readily available and Auditel is one of the leading consultancies of this type. We recommend a way ahead that offers a 'total solution' from analysis to implementation and ongoing management - one that should also provide independence from suppliers, payment by results and freeing your staff to focus on more important matters. We provide:

• An assessment of the essential business costs;
• Identification of and reporting on savings opportunities;
• Realisation of the savings;
• Savings into the future.

The first step should be to carry out a comprehensive, in-depth analysis of current essential services expenditure. When a thorough understanding of outgoings has been acquired, the data should be analysed to determine where savings could be made. This involves establishing benchmarks against which future savings may be measured, and producing a report outlining these potential savings.

After presenting a report containing detailed recommendations, these theoretical savings should be turned into a reality. Consultants should take full responsibility for managing relationships with existing, or new, suppliers. Achieving the projected savings (and rebates for overcharges in the past) is only the beginning of the job. The consultant should continue to assess current expenditure against new tariffs and services as they become available to ensure continuing benefits from optimum cost efficiencies across all essential business outgoings.

Worth the effort
Among thousands of organisations who have travelled this prescribed route successfully is Pizza Express. They saved £2.79 million. That's an awful lot of pizzas.