Special report
In one survey of just
8 UK companies from various sectors by franchised international cost management
consultants Auditel, it was discovered that in aggregate, they were wasting
£2.4 million per annum in overall expenditure on utilities and telecommunications
alone.
Unfortunately these 8 companies
are not isolated cases. Across the spectrum of British industry, comparable
wastage is taking place and needs addressing. Individually, some companies
- and organisations - are wasting anything up to £30,000 per annum,
or almost a quarter of their total annual expenditure, on telecommunications
alone.
"The worrying aspect,"
comments Auditel (UK) Limited's Managing Director Chris Allison, "is
these are otherwise well organised companies, many with a blue chip reputation.
The everyday operational realities of running major organisations, whether
companies, educational establishments, local government or health authorities,
are so complex that is often impossible to allocate internal staff resources
to monitoring expenditure streams and suppliers. For this reason, it is
usually necessary to outsource such expertise so that specialists with the
right analytical backgrounds and research facilities can focus on the over-expenditure
iceberg."
How can most savings be achieved?
Simply, because the supply market has been undergoing a metamorphosis, explains
Chris Allison. "Take the telecommunications market, the first to be
opened up to rival suppliers and tariffs. With the advent of deregulation
in the UK, there has been increased competition within the entire utilities
market. This means that there are now a host of cost saving opportunities
to be identified." The fact that British business is failing to take
this initiative to get better deals from telecommunications suppliers was
recently pointed out by Don Cruickshank, ex director general of the Office
of Telecommunications (Oftel). He drew attention to the number of case studies
indicating how large and medium sized businesses were missing out on the
new opportunities to reduce costs through choice.
The same principles apply to water, gas, electricity and other costs often
not adequately monitored.According to Chris Allison there are significant
opportunities for lower prices, better quality of service and improved billing
and flexibility, but many business customers are not availing themselves
of these opportunities - if indeed they are fully aware of them. Cruickshank
agrees: "Shopping around for the cheapest supplier of specially tariffed
services could get businesses a tidy £25,000 saving on a spend of
£30,000."
Auditel, which researches and negotiates discounts with suppliers, knows where to find more competitive deals in the market, feels that "far too many companies are missing out on potential savings." It's consultants work organisations as diverse as professional practices, engineering and manufacturing businesses, hi-tech firms, hospitals, educational establishments and councils.
The policy is not to charge the clients. "We earn only on a results basis," explains Chris Allison, "taking a share of the savings we find. That's how confident we are that there are savings to be achieved whenever we visit." Privatisation, he adds, has led to a vast increase in choice on the utilities market. "Many business chiefs may be surprised to know that there are now approximately 300 national telecommunications companies in the UK market, over 30 suppliers of gas and certain organisations could qualify to purchase electricity from any of the around 20 electricity companies. All of these are constantly tracked and analysed by our cost auditors."
"Generating new income through cost management has now become accepted as a major aspect of each business's bottom line," emphasises Chris Allison, "which is why our services in tracking and depressing overpayments in telecommunications, gas, electricity and water supply bills have become so much in demand from commercial and other organisations. 'Cost detectives' are now indispensable outsourcing considerations for those companies who take their bottom line seriously.
"Notes
for editors revealed by the Auditel Survey:
One importer and wholesaler was found to suffer from bad
choices in tariffs, suppliers and discount options, including on mobiles,
leaving the company with annual all-phones expenditure of £10,284.04.
In this case, the cost of the auditor's recommendations at different use
levels generated savings amounting to £2,560.35.
One housing association
also benefited from cost auditing, resulting in annual savings of £4,873.98
through a combination of action relating to lines, rental equipment, discount
schemes, maintenance, electricity and water/sewerage charges.
In another case, a commercial
storage expert was already using a mix of telecoms providers for its various
sites - BT, C&W and ACC, as well as five mobile suppliers. Its annual
spending on these amounted to £31,246.62. The annual saving summary
by the cost auditor drew in a combination of elements such as equipment
replacement, new rental options, maintenance, tariffs and exploiting special
options. The result was a handsome annual saving of £6,792.75.
Even larger savings were achievable with a data networking/general IT company. Its 15 different numbers with a total of 39 lines produced considerable annual expenditure of £61,440.16. The cost auditor, using his knowledge of a complex telecoms market, soon generated savings - £9,442.30 by using alternative service providers at the company's 4 offices, plus £131.61 a year by using better schemes. As a bonus savings were also found in gas and electricity usage.
A training and enterprise
council in the London area, with an annual turnover of £22 million,
had an annual utility expenditure of £147,900.00. An Auditel consultant
analysed these figures and their sources and came up with an annual saving
summary of £16,279.26, including clawbacks on electricity and gas.
One local authority was shown how to make annual savings of only £846.37 in its utility costs - the savings were limited due to the spreading of costs over several buildings and the fact that most telephone calls were local in nature. However, one auditor, on tracking another council's mobile traffic, soon discovered a large expenditure on unauthorised private calls - and with one client, saved an immediate £70,000 per annum by pointing out a less sophisticated call traffic system was needed.
More was saved for a major tobacco products supplier with several divisions. Excluding equipment leasing, its annual expenditure on fixed telephone systems amounted to a giant £725,236.32. In this case the scope for saving was not difficult to identify. By switching to an alternative service provider, an immediate £106,350 per annum could be saved. On top of this, reducing unnecessary lines resulted in a further saving of £21,000, cancelling maintenance charges pulled back £2,648.39, reducing additional line charges saved £926 and replacing rented equipment another £5,250. The value of broader investigations in other areas was not lost on the client - and is not lost on all clients whatever their size.
