How an Expense Reduction Franchise Can Justify Its CostsPublished by
Miles Lee on 12/24/2012
How an Expense Reduction Franchise Can Justify Its Costs
An expense reduction franchise is often faced with the thorny issue of being able to justify its costs. It's not actually that hard, since the expense reduction franchise gets paid based on their performance. They get half of all the savings they help their client companies realize — the more savings the expense reduction specialist finds, the better he or she does.
The problem is, there are people who believe their business doesn’t need to cut costs. If a company is profitable, expense reduction may not take priority in many employees’ or executives’ eyes. Or they may be skeptical about working with an expense reduction franchise like yours.
Here’s an example of effective expense reduction that may turn those skeptics into believers - and into clients for you. Recently, one of Alliance Cost Containment's franchise owners worked with a chemical manufacturer to see where they could streamline their financial operations. Simply by analyzing the chemical manufacturer’s insurance policies, our expense reduction franchise helped the company eliminate duplicate coverage and reduce expenses by 13.8% — or $154,000 — in just one year.
Think of what that means for the company. That's two or three employees' salaries. Or a small bonus for the employees. Or it's bottom line profits that benefits everyone.
Many managers today operate with the philosophy that it’s better to avoid cost increases rather than to continuously drive expense reductions. The problem is this could result in costly business practices sprouting like weeds within the company.
By working with an expense reduction franchise, your clients can get an objective, no-nonsense look at their bottom line. You can show them where to save, without cutting salaries or slashing important budgets.
Your analysis could prove that the company is performing at an optimal financial level, or you could show them how they could start saving thousands of dollars by following your expense reduction principles.
By showing companies how to work with an expense reduction franchise, you can create a proactive cost management approach within the organization that will serve them well for years to come.
How a Cost Containment Firm is Different from a Group Purchasing OrganizationPublished by
Miles Lee on 12/17/2012
How a Cost Containment Firm is Different from a Group Purchasing Organization
A cost containment firm like Alliance Cost Containment is different from a group purchasing organization (GPO) in a number of important ways. Many hospitals and healthcare organizations already have relationships with GPOs, so they think it's unnecessary to work with a cost containment firm.
But there are enough important differences between the two, that the cost containment firm ends up being the better choice with more cost savings.
How?
For one thing a GPO only done one thing: it manages supplier networks, and that's it. It doesn't consult, it measure true savings of the hospital or healthcare organization to find out how to improve margins and profits. A cost containment firm can re-negotiate vendor agreements, find and eliminate duplication of efforts, and even help streamline your workflow processes. If a GPO’s vendor can't buy it, they can't work with it.
Yes, a cost containment firm also has leveraged buying power it can use on behalf of all its clients. For example, they may have a relationship with a cell phone supplier, and by exercising its mass buying power, it can get better monthly deals for all its clients.
But there's more. A GPO gets paid by the suppliers and vendors in its group, based on the sales it generates. They're motivated to sell as much as they can, whether you need it or not. But a cost containment firm is paid on their performance. They want to find savings, not spend your money. Remember, "savings" = less money to a GPO.
GPOs also depend on administrative fees paid by group members (i.e. you) in order to continue working. A cost containment firm works independently, and fees are based on a percentage of your savings. If you don’t save, you don’t pay.
Keeping your operating costs as low as possible without jeopardizing the quality of service to your patients is one of the easiest and most efficient ways for your healthcare organization to improve your margins. If your organization needs a risk-free way of maximizing profits, consider working with a cost containment firm.
A firm like Alliance Cost Containment has the ability to closely analyze your firm’s financial situation and expense data, improving your bottom line by negotiating lower rates from your suppliers and by improving workflows within your operations. They're more than a one-trick pony, like a GPO. A cost containment firm can give you all the tools you need to succeed.
Owning an Expense Reduction Franchise Has Its BenefitsPublished by
Miles Lee on 11/26/2012
Owning an Expense Reduction Franchise Has Its Benefits
Owning an expense reduction franchise allows managers and executives to branch out on their own and to take control of their own careers. Their decisions would not only directly impact their own company, but their clients' companies as well.
Owning an expense reduction franchise comes with its own set of responsibilities and challenges. One responsibility of owning a expense reduction franchise is that it is your job to keep expense reduction top of mind for your clients. These are typically CFOs, company controllers, and business owners.
As the expense reduction franchise owner, you will have direct and frequent contact with decision makers at the executive and ownership level. Working directly with high-level executives gives you learning opportunities that you can use every day as you grow your business. And as any business owner knows, it’s never a bad idea to form relationships with management and owners of other companies.
Another benefit of owning an expense reduction franchise is that you can get things done faster and more efficiently than if you were working for someone else. As someone in the expense reduction industry, you’re naturally inclined to find ways to work more efficiently. But if you had a boss to answer to or red tape to get around, that cuts down your ability to get things done quickly. As a expense reduction franchise owner, you would have the ability to be proactive, and get things done more quickly than a larger firm.
Third party expense reduction consultants also have another benefit. They take on the risk and reap the rewards. Of course, owning your own business has inherent risks. But as the saying goes: the greater the risk, the greater the reward. The better you become at managing risks and determining your business strategy, the more rewards you’ll see. In time, the business experience and C-level contacts you make will help you grow your business. Not only will your clients benefit from your depth of experience, but your firm will prosper as well.
Owning a Cost Containment Franchise Puts You In Touch With Many BusinesPublished by
Miles Lee on 11/19/2012
Owning a Cost Containment Franchise Puts You In Touch With Many Businesses
A cost containment franchise can put its owners in touch with many different businesses, covering many different industries and fields. Because of their work in expense reduction, the franchise owners are in a position to talk to as many executives and business owners as possible.
Expense reduction is something that many companies struggle with, typically because the CFO is too busy handling daily and quarterly tasks, and doesn’t always have the time to focus on finding ways to reduce costs. Many items can take attention away from continuous expense reduction. As a result, most companies need help when it comes to continuous expense reduction. This definite need for cost reduction assistance is just one reason why you may be interested in owning a cost containment franchise like Alliance Cost Containment.
As a cost containment franchise owner, you would get to be your own boss. Being a cost containment franchise owner comes with its own set of responsibilities and challenges. One responsibility of a franchise owner is to keep expense reduction top of mind for your clients.
As the expense reduction expert, you will have direct and frequent contact with decision makers. Working directly with high-level executives gives you learning opportunities that you can use every day. And it’s never a bad idea to know people in managerial positions.
The best part about working with CFOs, controllers, and business owners is that your expense reduction advice will have a direct impact on the company’s bottom line, and the health and success of the business overall. As a cost containment franchise owner, it's incredibly rewarding to see your suggestions used, and to see a company grow as a result of your hard work and recommendations.
Another benefit of being a cost containment franchise owner is that you are directly rewarded for your hard work. Firms pay you based on your performance. So the better you perform, the bigger the payoff. Not many jobs are as highly incentivized as a cost containment franchise owner. While the tasks you’ll face as a franchisee are not without their challenges, owning a cost containment firm is a career in which intelligent, diligent, driven people are directly rewarded for their hard work.
Why Cost Reduction Can Cause Resistance at Your CompanyPublished by
Miles Lee on 9/24/2012
1) Fear of looking incompetent
In general, people are proud of their work and do not want to appear that they are doing a bad job. But the fear of looking incompetent often comes at the high price of an organization’s profitability. As a CFO, you can communicate that a third-party firm aids in long-term savings and continuous improvement, which in turn will help everyone succeed.
2) Sacred vendor relationships
Favored relationships that employees have with vendors are probably the single largest cause of resistance. These cozy vendor relationships often cost the company money, and usually require an unbiased third-party expert to point this out. To reduce costs, make sure you have a policy about accepting gifts and perks from vendors, and lead by example.
3) "My job will become harder."
Many employees fear that cost reduction will complicate their jobs because of the training and extra effort required. CFOs can counter this by prioritizing what areas require reduction to make the task more manageable. Creating small wins and recognizing victories goes a long way toward helping employees see the fruits of their labor.
4) Services with the vendor will be more difficult.
Some companies know they are paying a premium for a supply or service, but attribute that high price to excellent service quality. There are ways to reduce costs here which won’t affect your vendor relationship. For example, go directly to the company owner to negotiate. Or offer a multiple-year contract in return for reduced costs.
Cost reduction is vital to your organization’s success, and overcoming resistance to change is vital to the success of any CFO’s efforts in maximizing their organization’s profits. Audit Your Expense Reduction EffortsPublished by
Miles Lee on 9/17/2012
Your expense reduction efforts are an ongoing process. You can't just set up the process and then be done for the year, or expect things to work properly. Expense Reduction is not a set-it-and-forget-it endeavor.
It requires diligence, patience, and a precise attention to detail. To be truly effective, you must audit your expense reduction efforts on a regular basis. This can not be done just once per year. If you work with a chief cost containment officer they will more than strongly recommend doing this on a monthly or at least a quarterly basis, depending on the size of the spend being examined.
The importance of follow-up cannot be underestimated when it comes to expense reduction. It took hard work and persistence to convince vendors to lower their rates, so you need to make sure that they continue to honor them by providing the discounts they promised.
But this isn't always as easy as it sounds. Unless you have a dedicated staffer who examines and compares invoices on a regular basis, it can be very easy to miss extra fees a vendor might add on even after they’ve agreed to provide you with lower rates. You have to watch out for delivery fees, packaging fees, fuel surcharges, etc. If the vendor has agreed to pricing on many different SKUs each of these new prices need to be monitored. This can be tricky if there are hundreds, thousands or even tens of thousands of ad hoc products being purchased. Incorrect prices or additional fees will sometimes slip in unnoticed eating away at your savings, so you need to continually monitor the situation.
All of this follow-up might seem like a lot of work for your company’s finance or accounting department – and it can most definitely be time consuming. But a chief cost containment officer can help monitor everything. They can also do it quickly and efficiently since expense reduction is all that they do, they have tools to assist and they were instrumental in setting up the expense reduction plan.
A chief cost containment officer specializes in auditing your costs, closing gaps, checking for duplication or inefficiencies, and in making sure that the savings they have negotiated for you from vendors are hitting your bottom line and providing immediate savings. Without auditing, or a chief cost containment officer, your firm will not achieve the best possible results when it comes to cost containment and expense reduction and will likely be leaving money on the table.3 Expense Reduction Tips for 4th QuarterPublished by
Miles Lee on 9/3/2012
3 Expense Reduction Tips for 4th Quarter
Expense reduction ends up being one of the goals during the last quarter of the year, which is already the busiest quarter for many organizations. A company may be planning for the upcoming year, examining the budget, trying to determine sales goals, and more – all while staying on top of your company’s current needs. Forming an alliance with a cost containment firm now can help organizations contain costs in the 4th quarter and beyond.
1. Consider the importance of expense reduction in August and September. Retaining a chief cost containment officer’s services is something that companies need to do NOW, and not tomorrow. Let’s say an expense reduction specialist can save a company $20,000 per month. If that company waits six months to hire a cost containment officer, they’re paying $120,000 more than if they hire one today.
2. Renegotiate contracts with vendors in the 4th quarter, or even before the 4th quarter begins. Most vendors raise prices in the beginning of the calendar year. So if an expense reduction firm can renegotiate your vendor contracts in the 4th quarter while prices are lower, then those rates are being reduced based on the current value of those contracts. If you reduce prices before next year, you can skip the cost increase and start the new year with lower prices guaranteed
3. Continuously measure the effectiveness of cost savings. Just because new prices have been negotiated, don’t assume they will be implemented. Fairly frequently, negotiated rates are not implemented or the vendor finds additional expenses like a fuel surcharge, packaging charge, delivery charge, and more. Auditing savings on a regular basis ensures that those savings reach the bottom line. For more information on Auditing savings please download our white paper - Mind The Gap
Organizations typically also look at the next year’s budgets during the 4th quarter. If the budget needs to be reduced, it often means heavy cuts. But if they do expense reduction, they’re not cutting a budget, they're saving money. This is where an expense reduction firm can help organizations achieve the savings needed and in so doing increase profits.
5 Reasons a Chief Cost Containment Officer May Be NecessaryPublished by
Miles Lee on 8/27/2012
5 Reasons a Chief Cost Containment Officer May Be Necessary
Can a chief cost containment officer make a big difference to a company's bottom line? Cost containment may sound simple — just slash a few budgets, eliminate a few positions — but it is so much more complex than that. Here are five reasons a chief cost containment officer may be necessary to your company.
1. Increasing sales is less efficient than cutting costs. That may seem obvious, but it isn’t as simple as it sounds. Put simply, the work required just to make the necessary sales is more difficult, riskier and less efficient than simply containing the costs your firm is incurring.
2. Cost containment is about managing costs not slashing budgets. A chief cost containment officer will focus on reducing indirect overhead costs, instead of just cutting costs like a typical finance department might recommend. They can leverage their buying power to negotiate better wireless rates, equipment leasing, travel rates, and anything else that most companies don't even realize are negotiable. The savings your chief cost containment officer find can often save jobs while helping the company increase productivity and profitability.
3. There is no upfront investment. Trying to improve profits by increasing sales means adding more sales staff, and possibly a sales manager. But a chief cost containment officer can be outsourced and paid based on the savings they find for your company. That means no upfront expenses, office overhead, travel budgets, or the time and costs spent bringing the sales staff up to speed. The company shoulders no risk if the chief cost containment officer is paid on a contingency basis.
4. Your competition may already have one. Let's face it, every company is doing what they can to bring down costs, and they may be exploring any and every option to increase profits and outlast their competition - that means you. So if they can lower prices because they have already increased profits then they can win some of your customers.
5. Your company needs to be as profitable as it can be. You need to buy smart, and execute those savings to become as profitable as possible. One of the most effective ways is to increase your buying power. Very large multi-billion dollar companies may already have the buying power to get very low rates but small - to mid-size firms don’t have the same buying power and or expertise. Having a C3O can give you that expertise and power.
Differences Between Cost Containment and Cost CuttingPublished by
Miles Lee on 8/20/2012
Differences Between Cost Containment and Cost Cutting
The strategy and the Cost containment is essentially reducing the overhead costs of a business, but doing it strategically, without any blood-letting that typically happens when companies try cost cutting instead. Extra care is the important difference between the two.
Cost cutting, for many organizations that want to reduce overhead costs, may mean eliminating some of the services and expenses that organization has. It may be laying off staff, taking away some benefits, or cutting supplies and overhead, which means not allowing departments to purchase supplies they need just to function. Cost cutting has some short-lived benefits, but is often detrimental to companies and the way they operate in the longer term.
Cost containment is an ongoing process of reducing those overhead expenses, without eliminating necessary services. That's done by negotiating new rates with vendors and new vendors, and monitoring and maintaining promised discounts and lower prices.
Let's say a company orders 5,000 reams of paper every year in order to manage all of their paperwork. Cost cutting will slash the budget so that only 4,000 reams of paper can be purchased, and the company will have to find a way to do their jobs without that paper.
With cost containment, the company will renegotiate with the supplier so they are paying significantly less for those 5,000 reams. If the company can find a way to lower the paper price by 20%, they can continue to buy the same 5,000 reams of paper, but for less money.
Cost containment can still include some cutting methods, especially if there have been some new efficiencies put into place that make it unnecessary to purchase the services and expenses they had been buying, but can still lead to the same or better results.
So, if our paper-buying company created an electronic document system that only required 1,000 reams of paper to function, that would result in a much bigger savings that can be realized year over year. It would not only pay for the document system, but the 80% savings can then be used somewhere else, or go the bottom line in added profits.
Cost containment is an ongoing effort that is continually monitored and evaluated, while cost cutting tends to be a one-time exercise that may need to be done more than once, since the original problems — increased prices, growing expenses, lower profit margins — were never really addressed.