Painless cost cutting

Do you ever have a sneaking
feeling your electricity bill
is too high, or that you
should be able to cut back
on the cost of couriers?

Like most businesses there are probably
areas where you are sure you are spending
too much, but you may not know
where to start, and certainly want to
avoid expensive management consultants
digging through your paperwork.
However, there is a middle ground
between doing nothing and spending a
fortune upfront, and that is to call in a
“no savings, no fee” cost-saving consultancy.
These companies operate on
the basis that if they can't save you
money then they don't get paid.
Auditel, a franchised group which
concentrates on essential services
including telecoms, electricity and
waste management is one such operation.
The group was set up 10 years ago
when deregulation and privatisation
opened up these markets to competition,
and now has 90 consultants working
with more than 100 suppliers with
daily updates on tariff costs.
Expense Reduction Analysts (ERA) is
another franchised group operating in
the same way, but its 100 consultants
look at day-to-day business overheads,
such as banking, contract catering,
couriers, fleet and travel.
Chris Aston is the marketing manager
for both companies, which operate
independently, but share headquarters
in Winchester. He says: “Many of our
consultants are from the industry backgrounds
they now advise on, so they
really understand where savings can be
made. But it's not just about
price - it's about best value
- we look at quality of service
as well.”
The process is similar for
both companies. You give
them permission to review all
your relevant contracts and
invoices, they produce a report
which identifies where savings,
no matter how small, can be
made. If you agree the consultant
will introduce you to your
new supplier (or an existing
supplier with new terms) and the
consultant gets paid on a performancerelated
basis, as a share of the actual
savings made.
Aston says a key point is consultancies
don't just issue a report and disappear,
but will help implement any
changes. “We also carry out ongoing
monitoring of the new contracts. We
often end up becoming clients' outreach
specialists and forging long-term
relationships, because no one else in the
company is responsible for overseeing
these non-strategic expenses.”
The contingency fee for Auditel and
ERA is 50% of the savings made,
although this can be negotiated. Aston
says savings of 10-15% across the company
are typical, and these are sometimes
a lot higher.
At Auditel client Fired Earth, for
example, the consultancy identified savings
of around £80,000, including
saving £10,000 on couriers (5% of the
currrent bill) and £58,000 on telephone
costs, representing a 44% saving.
If you are thinking of using a cost
Growing management consultancy, make sure
the consultants are independent and are
not being paid commission by just one
or two suppliers. You should also make
sure that you're working with someone
who has enough information and
knowledge of the marketplace to investigate
all the options available with the
buying power to obtain the best price.
Consultants from large firms should
have enormous clout with suppliers,
unlike most finance directors, who will
also probably not have the resources to
find the best deal. It's not impossible to
make savings throughout the business
yourself if you invest enough time, but
a cost savings consultancy may make
the process a lot easier and have a much
bigger effect on your bottom line.