Did you know you’re overpaying for some of your business expenses by roughly 18%?
You aren’t alone: most companies don’t realize that they are usually overpaying vendors and services.
We weren’t making that statistic up, either. On average, we save our clients 18% when we audit their expenses and identify areas to save. That’s a lot of money.
Because we often encounter business owners who do not realize they are overpaying on the cost of doing business and do not know where to start, we put together this guide. Below you will find information about why you should consider hiring an expense consultant, when the best times are to bring one onboard, what questions you should ask before selecting one, and what expense reduction consultants do once they get to work. We hope by the end of the guide that you’ll be in a better position to start spending less and start doing more.
What You Will Learn
- Why businesses hire expense reduction consultants
- When businesses usually consider hiring an expense consultant
- How to find an expense consultant and the questions you should ask them
- What expense consultants do
Why Businesses Hire Expense Reduction Consultants
There are many reasons why businesses consider hiring expense consultants, but we generally find they fall into a few different situations.
- Businesses who are looking to cut costs
- Businesses who think they are overpaying for supplies, services, and equipment
- Businesses who want to switch or consolidate vendors
- Businesses who want to take advantage of tax deductions
Regardless of your business’s situation, an expense consultant can help you navigate the most effective path to identifying new savings opportunities. Not only are they very familiar with the ways businesses overspend, they have relationships with numerous vendors and service providers and insight into the market averages for how much you should be spending on a given type of service or supply.
If you are wondering how much you might be able to save right now, we have a free spreadsheet you can use. Download it here and input your how much you annually spend on a given category. You’ll get instant insight into how an expense reduction consultant – also known as a cost savings consultant – can free up cash flow for your business right now.
Having covered why a business might consider a cost savings consultant, we now turn to when they typically consider engaging in their services.
When Businesses Consider Hiring an Expense Consultant
It is never a bad time to consider hiring an expense consultant, but there are certain situations and events that make hiring one more attractive or useful than others. This can range from financial hardship to strategizing expansion and everything in-between. We have highlighted some of the most common scenarios below.
- When you want or need to grow your company, but you don’t have the cash flow to do it. Every business faces this difficulty, some more acutely than others: you need to grow, but the money isn’t there. This is especially the case when a business gains new customers or clients, but hasn’t started getting paid yet. An expense consultant can identify where you can cut costs, freeing up a cash flow stream you didn’t realize was available.
- When you are building your company. Entrepreneurs and business owners face a unique cash crunch when they are first starting out. Chances are you’ve heard the statistic 50% of businesses fail within the first 5 years. A big reason why this happens isn’t because the business is bad or the business isn’t profitable – it’s because the cash flow cannot keep up with expenses. An expense consultant can help you lower your monthly expenses, increasing your cash flow and keeping you in business longer.
- When you want to ensure you are spending money as efficiently as possible. Some businesses we encounter face a unique challenge once they become large or when they acquire other businesses: they don’t have any insight into what they are spending and they don’t realize how much overlap there is between vendors and services. In one instance, we discovered a business retained 54 separate vendors for lawn care – and it wasn’t for lawn care in 54 different cities either. In these instances, an expense consultant will be able to identify consolidation opportunities among vendors and services, plus they’ll be able to refer you to better services at potentially lower costs.
- When you are reviewing your budget. Have you ever found a surprise you didn’t know you were paying for or said “We’re spending how much on that!?”? A cost savings consultant will be able to know how much businesses spend on average for a given service or spend category, reducing any outliers you discover, think you discover, or didn’t know about in your budget.
- When over-spending affects your bottom line. Just like we mentioned above, sometimes your expenses negatively affect your cost of doing business. A cost savings consultant will identify expenses you can reduce, returning your business back to profitability.
Finding the Right Consultant for You
How do you know if a particular consultant is a good match for your business?
1. Ask How They Charge for Their Services
Most reputable expense reduction consultants work on contingency. They only get paid when they save you money. Once the savings they find have been calculated, they will take a percentage of the savings. The fee that is charged depends on their credentials and expertise in navigating your contracts.
2. See If Their Expertise Aligns with Your Business
Some expense consultants specialize in particular kinds of contracts. Others cover a broad range. When choosing your consultant, check to see if they have knowledge of your particular industry. If not, determine if the areas that they cover relate to yours.
Expense to Profit has a wide range of expertise ranging from telecom, hospitality, manufacturing, shipping and equipment leasing to employee benefits, real estate fees and energy costs, and a lot more.
3. Review Their Track Record of Success
The right expense reduction consultant for you will have excellent references. You can and should find out. Reviews are usually listed on your consultant’s website. Look at them. This will give you a better idea of what you can expect from your working relationship and how much you can save.
4. Review Case Studies
Remember that your consultant only makes money if they find you savings. That means the more money they find, the more you both will make. This should motivate your consultant to find as much savings as possible. These savings usually range from a couple thousand dollars to millions of dollars, depending on the size of the company.
You can compare savings by looking at client case studies. Here are some of ours:
- Commercial Real Estate: $196,450
- Healthcare and Dental: $542,000 per year for a three year period
- Manufacturing: $350,000 annually
5. Ask About Vendor Partnerships
Some expense reduction consultants partner with certain vendors. That can be an advantage in some instances, but can also be a conflict of interest if they put their vendors priorities above your own. Ask if they have any vendor partnerships and what the terms of those partnerships are.
6. How Much of Your Time Will They Need?
How much of the work will your consultant do and how much will you have to do? Consultants have a wide range of work practices. You should ask your vendor to walk through their process and get a sense of how much effort will be involved.
7. Cost and Expense Analysis
Ultimately, the savings you will achieve depends on how quickly and how well the consultant gets to know your business and its needs and how well they know the pricing, policies and practices of the relevant vendors and industries.
Expense to Profit is an expense reduction consulting firm that works for you.
- We work on contingency and split all of the savings with you.
- We do not use preferred partner vendors. We usually will keep you with your vendor if you’re happy with their service.
- Our process requires very little effort on your part.
- We have an efficient process.
- We have deep technical knowledge of pricing and contract practices across a wide range of vendors and services, including:
- Energy and utilities
- Mobile phone services
- Food service
- Equipment leasing
- Federal tax credits
- Real estate leases
- Medical supplies
- Manufacturing supplies
- Bank and financial fees
- HR and Payroll management
- And many more expense categories
The Expense to Profit Process: Three Steps to Savings.
Step 1: Review, Audit and Assess
Give us fifteen minutes with your finance person and each of your department heads. We will speak to them and then review your vendor invoices and contracts to understand the services you require and the terms your vendors have set with you. We make a comprehensive and organized list of all the vendors and services you’re using and what you’re currently paying.
Then, we start examining the contracts and invoices. Here is what we look for:
- Are you paying the best possible rates? We have a large database of rate information, so we know what the best available rates are. We know what others are paying for similar services.
- Are there any potential errors? We often find billing errors or overcharges, especially in complex technical contracts. Workman’s compensation insurance, for example can be very technical and mistakes are easily overlooked. We have a track record for combing through the details and finding potential expensive problems.
- Are you buying the right package: Right-sizing contracts. We can also help identify things like your actual usage. Sometimes we can save very significant sums by adjusting the frequency of a service, or the size of monthly delivery to your actual needs.
Step 2: Design, Implement, and Negotiate (Cost Reduction Program)
We organize and consolidate our findings. We prioritize any overcharges, usage modifications, billing errors, and/or technical improvements that directly relate to your company’s spending. We then make suggestions and contact appropriate vendors to make sure they are charging you the right amount.
We will negotiate the best possible terms for each contract. Rarely do we need to actually change your vendor to achieve significant cost savings. We can often save anywhere from 10% to 40% on each contract.
You review the terms of every new contract and make the final decisions. You are not obliged to make any changes at all.
We never compromise the quality or convenience of your services.
Read some real-life stories of how we’ve saved clients serious money:
- Finding Savings in Hidden Mobile Contracts
- Trouble With Jargony Contracts: Worker’s Comp Premiums
- What Should Your Employee Benefit Plan Really Cost?
Again, we can usually find significant savings without changing vendors. We can, however, also set you up with new vendors when it’s appropriate. Having negotiated thousands of contracts, we know what things should cost and what your competitors are paying. Once this is all in place, we help train your team on new financial protocols.
Step 3: Measure, Monitor, and Save
You will start seeing savings right away, but we check in every few weeks to measure and make sure it continues. If something comes up that doesn’t look right, we fix it and monitor the problem. As your needs change, we help you restrategize and renegotiate, which leads to more savings over time.
Choose Wisely When Hiring an Expense Consultant
Hiring an expense reduction consultant can save you hundreds and often thousands of dollars each month. Make sure you’re working with someone who will make the effort to understand your business deeply, knows the ins and outs of your industry and services, and wants to be your partner for a long time.
We’d be very happy to talk to you about our services. We are proud of the results we achieve for our clients and enjoy building relationships that last for years.
We’d love to hear from you.
Phone: (240) 406-9075
Email: [email protected]
Published by Marc Freedman
Marc currently serves as our Chief Cost Evaluator, expertly advising our client management team on how to help you successfully achieve your business and financial growth goals. A respected mentor to all he consults with, he is an avid collaborator and contributor to the spend consultant community, guiding thought leaders to formulate, design, and install the best operational solutions available to their clients.