What You Don’t Know About Your Operating Budget Will Cost You

Welcome to 2016! With the fresh, new year, you probably have some fresh business goals aimed at helping your company increase profits, revenue, and cash flow while containing costs.

How will you reach your goals this year?

Finding the money you didn’t know you had

Profits swell by either increasing revenue or decreasing expenses. Both topics are important, yet many companies focus more on increasing revenue. Usually, there’s a feeling that containing costs is more challenging. When the subject comes up, company leaders may believe:

• All possible cost savings occurred during the last end-of-year budget review.
• Most expenses are fixed costs.
• We don’t have any control over the prices of many services.

Your team may also believe that cost reduction means reducing inventory or people, and you don’t want to cut either of those essential resources.

However, it’s likely that you’ve been thinking in terms of direct expenses. We’d like you to consider the hidden costs of indirect expenses.

What you don’t know about indirect costs does cost you. A deep dive by an industry expert can offer transparency and dramatic savings for the whole company. To learn how much, read through our Case Studies.

Every expense category and the industry that supports it has its secrets. Knowing those secrets means that you’ll receive the best possible pricing and vendor support.

Recapturing profit

Companies limit their abilities to improve cash flow in two ways.

One of the greatest limitations is the belief that indirect expenses are already optimized, fixed, and cannot be improved upon. However, overhead costs vary dramatically; they can be influenced by a multitude of factors including the size of your business, the industry you’re in, your geographic footprint, and  your knowledge and experience within the industry supporting the expense category. Most companies don’t have the time or resources to perform a deep analysis of their options for reducing costs across all their expense categories,  resulting in untapped cost-reduction potential.

The second major limitation is the belief that these hidden costs aren’t a big problem and that reducing them won’t produce substantial savings. However, the opposite is true. For midsize organizations, especially those with multiple locations, the savings they can realize from reducing indirect costs can amount to hundreds of thousands of dollars per year.

A fresh look at where your money is going

Procurement teams traditionally focus on reducing direct spend — and that’s critical. However, failure to examine indirect costs can hurt your business and hinder profit recapture.

To learn more, your organization can look beyond your own staff to contingency-based expense category experts who can offer transparency — and dramatic cost savings — to support your 2016 business goals.