One of the problems that a lot of people experience is that over time their supplier base gets very flabby. By flabby, what I mean is that you’ve got too many suppliers. Within that there are too many transactions, not just caused by the number of suppliers, but also caused by not managing those suppliers and telling them what your requirements are, which means that they are not invoicing you in an efficient manner. This is procurement management and the aim is to get a control on your business costs because all of those trabnsactions and suppliers are costing you money every time that you post an invoice to your purchase ledger.
Every purchase invoice costs you maybe £30 or £40 to process from start to finish. So that’s from raising the order the whole way through to payment and reconciling the bank. If you can take some cost out of that process, there’s a benefit to you.
It frees up resource within your finance team to do other work.
It’s pretty simple & here are some pointers for you:
1) Run a nominal report by supplier for the nominal codes that you are going to review. Look down that and, with colleagues, seewhich of the suppliers can actually supply more products than they’re currently supplying, whether that’s geographical spread, or product spread or …..
2) Request information from each supplier about the products they supply you with and ask at the same time what else they could supply as part of your cost reduction & spend optimisation programme.
3) Once you get the information back in from the suppliers about which products they’re supplying & could supply, go into the detail of it on a spreadsheet and mark which items could be provided by another existing supplier.
4) with that detail you have the tools to tender the business as part of your cost reduction efforts.
An aim of your procurement management programme could be to reduce the number of suppliers. We had a case where a client with 25 sites had 19 suppliers for the same product range. Madness. Now, it was all done for the right reasons at the time as the sites were opening or acquired, but it was never centrally consolidated as part of a thought through procurement management programme.
In terms of spend optimisation and using cost reduction to drive down your business costs you should also be aiming for one invoice a month per supplier.
1) A consolidated monthly invoice which has a
2) schedule attached to it, showing the breakdown by nominal code for each of the sites which can be sent out to the sites
3) the sites then approve their spend before the management accounts are produced so that you’re covering all the bases.
We’ve seen situations where clients have gone from over 100 transactions a month to 1.
You can do it too. As part of your spend optimisation programme you’ll build stronger relationships with your suppliers so that your entire procurement management programme is integrated and drives down your business costs.
In terms of procurement management, understand your supplier systems and turn them to your advantage. For example, get better credit terms. If the single consolidated invoice is dated the last day of the month, which is typically what it is, and you get 60 day payment terms, you can get up to 90 day payment terms for the items delivered at the beginning of the month.
So lots of benefits and a process that we go through which you can implement either fully or in part.
It’s part of our standard TPG Fair Market Value Savings Process.
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As energy prices rise and budgets get tighter, most businesses are looking for ways to save money on their electricity bills. Most of us are aware of the energy saving tips, like turning off computers and lowering heating, but in this article we are looking at some of the bigger picture ways to save larger amounts of money on energy, reducing overheads and increasing profits for your business.
Now in this section, we’re not thinking about going green in an environmental sense, but more in the ‘back to nature’ sense. If you provide employees with a space outdoors, many businesses find that their employees don’t use company equipment and resources as much during their lunch hour. Of course, this is likely to be more effective in the summer months when the sun is shining, but getting staff outdoors for a short time every day increases morale and productivity overall.
Computer technology company Dell announced recently that they are aiming to have at least half of their workforce working remotely by 2020. Whilst this may seem like a huge number, it could be worth it in terms of the vast savings that can be made.
For a lot of businesses, things like IT, secretarial support and even sales teams can be outsourced or home-based roles, as long as systems are in place to retain communication and motivation. These days, many workers are seeking flexible working arrangements to improve their work-life balance, so a move towards remote working may even improve staff morale.
This reduces the energy used drastically, as you don’t have to supply the electricity for employees to work and save money on technology, heating and lighting as well.
Ditch the Car
Company cars and fuel costs are one of the major expenses for many businesses. Savvy savers are looking for ways to save on the cost of fuel. Car sharing or having a car pool are two options that that will reduce fuel consumption saving money overall.
This means that employees leave the car at work ensuring they only use it for work purposes and it’s available at weekends, evenings or when the employee is on holiday. This not only allows others to benefit but cuts the cost of petrol allowances considerably.
Negotiate with Suppliers
At The Procurement Group, we help businesses to negotiate their existing contracts with suppliers (or consider alternatives if necessary) to ensure that they are on the best tariffs and see whether any further savings can be made. We will look at all of your outgoings, not just energy, and give you recommendations of where cost savings can be made. Best of all, we guarantee substantial cost reductions within four weeks and if you don’t save money, you won’t pay a penny, as our costs are a fraction of the savings that we generate for you. For more information, contact us today.
Here are our top ten tips on avoiding cashflow problems in your business:
- Manage your cash: Monitor payments in and out, late payments and stock levels. Check month-to-month changes and quarterly trends to spot where cashflow is squeezed.
- Invoice customers without delay: Make time to send out invoices promptly and collect the information you need to send out invoices when you make a sale or set up a customer account to save time. Give a clear payment is due date every time.
- Offer payment options: Go for a bank transfer first – you get the money quicker, but accept cash, cards and even PayPal.
- Give early payment discounts: Tempt a customer to pay promptly with an early bird discount.
- Monitor payments: Keep an eye on your aged debtors list and chase late payers with a polite prompt.
- Set credit rules: Manage your cashflow instead of reacting to customer demands. Credit control is about managing non-payment risk to your business.
- Accept some customer’s won’t pay: Have someone on the staff to follow up late payers with telephone calls, friendly warnings and if all else fails, debt recovery through the courts.
- Pay bills when they are due: Don’t pay early unless it suits you – pay invoices on their due date to keep your cash in the bank for as long as you can.
- Ask suppliers for credit: Suppliers want your custom and will often extend payment deadlines to keep your business.
- Don’t tie up cash in stock: Excess stock means money tied up in the warehouse that could otherwise be in your bank account. Keeping track of your inventory will help to keep stock levels just right.
When you’re a small business selling goods to the public or retailers, one of the most difficult things to get right can be your inventory planning. Either side of the ideal stock level can have disasterous consequences for your business. If you have too much stock, your cash is all tied up in products you can’t sell and if you have too little, you are losing out on sales. Both of these scenarios have an impact on your cash flow and it is critical to monitor them regularly.
In the early days of your business, you may think that there are more important things to do than spent time and money on stock control. As the business grows though and you have more funds available to put the processes and systems to put in place, you may find that you have less time and mistakes can be more costly than they would have been in the early days.
Basic forecasting is much better than none at all
There are simple forecasting measures that you can take with even a basic spreadsheet. You won’t get everything right – any form of forecasting is only guesswork – but you should make it as informed as possible. Think about average levels of sale, per week or month or whatever suits. Look at seasonal fluctuations to see how they impact on demand. Check how much faster new items sell compared to your older products, and see if you can work out how fast the sales tail off. Be aware of how long it takes you to replenish stock levels. Make sure that you build in some form of buffer, or contingency, to allow for unexpected demand (but be careful to monitor this very closely – this is the area where you can easily tie up a load of cash!).
Don’t feel bad if you end up getting some numbers wrong, as long as you’ve taken care to factor in everything you can. A rough forecast is infinitely preferable to none at all.
Don’t be afraid of the big boys
When it comes to deals with big retailers, it is important not to let them rough you up too much. Obviously, it is fantastic if you can get your products into a major retailer or department store, but do your sums before signing any contracts. Weigh up any reductions for discounts that the retailer will invariably want, look at reserved stock and consider whether they need any exclusivity.
You should also consider your other customers, because if they see your goods in a big store at a price lower than they can afford to charge, this may lead to them feeling that they cannot compete and cease stocking your products.
It is so important to sit down and think about stock control at the earliest opportunity. Follow these tips and you will find that it isn’t too difficult to try and keep inventory and demand under control.
It can be difficult to cut back on technology, especially when we are bombarded with advertising for the latest gadgets every week. Before you make that expensive investment, here are a few ways that you can stretch your existing technology:
1. Your mobile’s camera:
Most mobile phones (even very basic ones) have built-in cameras, which can be used for much more than sending photos to friends. A service called Qipit turns the camera into a portable scanner, which allows you to print out the photo later via a website. You could also scan an actual document and fax it for later retrieval and read-back on your mobile with an app called scanR.
There’s also barcode reader technology, which can help you when it’s time to make a technology purchase. There are several smartphone apps that enable this, allowing users to scan a barcode at the store and instantly do an online price comparison. Aside from traditional barcodes, 2-D barcodes (think digital camouflage, not vertical lines) have become a new trend in marketing, allowing cell phone owners to scan a barcode and get more information about a product or service. These barcodes are even making their way onto business cards.
2. Mobile Chat:
An alternative to text messages for businesses is instant messaging. Most of these are free for users, but do require a data plan for internet usage. Still, for mobile travellers, a data plan is probably cheaper than a texting plan.
3. VoIP technology:
Using voice over internet protocol can save money on mobile minutes, by allowing you to make free or nearly free calls. There are smartphone apps available to allow your mobile to work as a VoIP device, so you can make calls at similar prices to traditional computer VoIP calls. Some of these services do require a data service plan, but this does allow you to make international calls for the cost of using the mobile Web.
4. Reduce your power usage:
One way to cut costs is to power down devices that you aren’t using. If you are using a power strip, plug multiple devices into the single strip and flip the power switch to easily shut down at the end of the day. There are also Smart Strips which can detect when a device is not in use and completely turn it and accompanying devices off. Power strips also act as surge protectors and can save devices from a sudden jolt of electricity, such as during a thunderstorm. Not having to replace an expensive electronic device is as good as money in the bank.
5. Digital Meetings:
If that business trip is not really necessary, consider whether a video conference call, meeting online or other method of communication would work instead. Some businesses even use virtual worlds like Second Life to hold meetings. If you use a Mac, you can hold video chats through iChat applications for free and Google, Skype, AOL and Yahoo also offer free chatting services. These free services allow you to be more productive in the office rather than being stuck on a motorway or waiting for a flight.