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Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts [email protected] 804-517-9863

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Page 1: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Expense Reduction:the timing has never been better!

Lycia Rettig, DirectorExpense Reduction Analysts

[email protected]

Page 2: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Which is easier to do?

Reduce expenses by $1or

Increase sales by $10?

Page 3: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Why All the Focus on Reducing Expenses?

• Current economic conditions are presenting challenges for most companies.

• Difficult to increase sales for most companies.

• Can be an alternative to personnel reductions.

Page 4: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Some Expense Management Challenges For Companies

Staff and Management has limited time to

address non-strategic costs

Employees with limited purchasing experience

makethe buying decisions

No benchmark dataNo time to monitor

Believing suppliers are looking out for their best interests

Believing suppliers are looking out for their best interests

Five companies with same supplier don’t get the same price

Five companies with same supplier don’t get the same price

TitleTitle

Believe they’re doing an excellent job of cost control

on their own

Believe they’re doing an excellent job of cost control

on their own

Level playing field between buyer &

supplier is a misnomer

Level playing field between buyer &

supplier is a misnomer

Multiple suppliersMultiple order points

Multiple suppliersMultiple order points

ExpenseManagementChallenges

Supplier loyalty doesn’t equate to

best price or service

Page 5: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Suggestions to Reduce Expenses

• Set expectations for cost reduction.

• Identify target areas and maintain a focus on them.

• Understand all components of the given expense area you are reviewing.

• Understand the benchmarks for your expenses. Ask others in your circles of influence what they are paying.

• Negotiate with your suppliers. Ask them for ways to reduce your costs without the need to create additional Competitive Tension in the market.

• Measure results, monitor for continued savings, react if not going as expected

• Take advantage of association discounts.

• Eliminate paper. Consider moving to electronic billing and statement mailing.

• Ask your employees for cost saving suggestions and reward them!

Page 6: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Analyze 4-8 weeks per category

Analyze 4-8 weeks per category

Define Options 4-8 weeks per category

Define Options 4-8 weeks per category

Implement

and Monitor

Implement

and Monitor

Best Practice Process Overview

Page 7: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

General & Administration Operating Expenses

Expense Category ERA Average Savings

Freight 18%

Merchant Card Fees * 33%

Office & Break Room Supplies * 35%

Packaging 21%

Production Printing 14%

Small Package Freight * 20%

Voice & Data Communications * 26%

Waste & Recycling 29%

Page 8: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Credit Card Processing Fees

Do you know your true credit card processing costs?

• Not just the discount rate but the net effective rate with all of the fees included.

• Do you know if you are being surcharged for certain transactions because your procedures haven’t been updated to meet the current processing rules?

• Do you have the proper number of terminals and access points?

Page 9: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Office and Break Room Supplies

Buying name brands or house brands?

• House brands can often save up to 30% or more for a similar quality product.

Be cost vigilant.

• Establish a contract list with your supplier (80% rule).

• Recycled toner cartridges.

• Delivery / ordering options.

• Paper grade and stock.

• Binding choices.

• Color vs. black & white documents.

Page 10: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Overnight Small Package Freight Services

Are you using and paying for the appropriate service type?

• Ground services will generally deliver next day within 400 miles only without a service level guarantee.

• Is 10:30 a.m. delivery really required? would 3:00 p.m. be okay? Industry secret: more than half of the items scheduled for

3:00 p.m. are delivered by 10:30 a.m.

• Is next day absolutely necessary?

• Do you have a parcel audit and automated credit program in place for late deliveries?

Page 11: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Voice & Data Communications

Have you done a comprehensive review of your voice and data communications services?

• Can you reduce the number of suppliers to achieve greater discounts? Is this the best option for your situation?

• Can you leverage new technologies to reduce your costs?

• Are you using all that you are paying for? Lines, information & reporting.

Page 12: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Appendix

Page 13: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Steps in Comprehensive Expense Reduction Planning, Concentrating on Non-Core Operating Expenses

• Identify components of Non-Core Operating expenses.• Start with P & L and Comprehensive Supplier Analysis.

• Establish an overall set of expectations for cost reduction.

• Develop a strategy for each expense category over a minimum threshold.

• Define expectations for each person that will participate in the process.

• Measure results.

Page 14: Expense Reduction: the timing has never been better! Lycia Rettig, Director Expense Reduction Analysts lrettig@expensereduction.com 804-517-9863

Complete analysis of your business and requirements

Process: Select and manage suppliers and prepare recommendations

Implement solutions, measure and monitor ongoing

Activities: • Define scope• Obtain data• Understand data• Know requirements• Benchmark

• Identify Potential Suppliers• Test the Market (RFP)• Analyze the data• Make recommendation

• Negotiate Supply Agreement• Implement recommendation• Monitor Compliance - Ongoing

Best Practice Process Overview

Deliverables: Baseline Report Recommendation Report

Implement & periodic review