Category: Other

Have you reviewed your business costs lately?

By Stephen Coleman

03 Jul 2018

Part One

In late 2017 Gerald Edelman was introduced to the Auditel Cost & Procurement service. The team is led by David Kendall, a Chartered Accountant, and the service focuses on reducing expenditure and improving service across all areas of indirect expense.

We are familiar with similar models and initially had mixed feelings about the potential benefits of this offering for both our firm and our clients. With certain doubts in mind, we decided to investigate further. We had several detailed meetings with David and were intrigued to learn about the opportunities that might exist for our firm. We felt that the most sensible step would be to trial the service for ourselves to ensure that it would be suitable for our clients. Several months into the process, we have been overwhelmed by our findings and wanted to share some of them here... 
 
Like most businesses, we focus on core income generating activities, which in our case is mainly professional services. We do have internal procurement processes in place and a trusted team of operational managers. However, David created and structured a project for us that was results orientated and meant that we had nothing to lose from undertaking an Auditel review. 
 
Auditel analysed our supplier spends and highlighted a basket of cost areas that were worth benchmarking. We provided a sample of invoices and some direction as to our service requirements, and an indication of whether we would or wouldn’t be open to testing new suppliers.
 
Auditel then set to work on understanding our cost profile across the 10 categories under review. They benchmarked our costs against businesses with a similar profile and engaged the marketplace through tenders and supplier meetings. 
 
Just four months after starting the process, we can confirm that our position is as follows:

Stationery and print – we are moving to a new supplier for 30% cost savings.
Cleaning – we are retaining our existing contractors with savings in the region of 15%.
Mobile telecoms – we have an opportunity to take advantage of 46% savings using the same underlying carrier. 
Fixed line telecoms – we have retained our existing supplier, benefitting from 11% savings on line rentals and an average of 47% saving on calls. 
Data telecoms – we have a qualified opportunity for 35% savings and are in discussions with our existing supplier to see if we can renegotiate our current contract. 
Fuel cards – we have moved to a new supplier for 20% cost savings. 
Archiving – we have retained our existing supplier and will benefit from 10% savings.

As well as the above, the Auditel team is now working on other cost areas for us, including couriers and postage, IT services and waste management.
 
The perception is that savings in indirect expense categories can be insignificant, and we would agree that in some instances this is true. However, if you accumulate them across a range of categories then the results can be significant. Auditel stated that they would seek to release £100k of savings in a medium-sized business, all of which is pure profit. To put this into perspective, a £10m turnover business making £500k profit before tax could see their profits increase by 20% as a result of undertaking this review process.
 
We now feel confident in recommending Auditel to our clients and have developed an initial sense check process which Auditel is happy to conduct for our clients on a goodwill basis.

Auditel can review costs across all sectors and industries. However, they state that the marketplace for carriage and shipping, packaging, consumables and merchant cards is particularly buoyant. These areas are likely to be high spend in the retail, distribution, manufacturing and leisure sectors and may certainly be worth a sense check.

Should any of our clients wish to be introduced to David Kendall, then please contact Stephen Coleman.
 

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