Cost Saving Tips
There are a number of ways that organisations can reduce their costs. Did you know that you can use brokers to reduce the costs of your utility bills? Or that charities do not pay VAT on advertising? Below is a simple cost saving checklist to follow.
Review your existing insurance requirements with your broker and also consider other brokers. Also discuss with your broker ways of reducing your premium such as changing the excess or improving security.
Using an energy broker can often save significant amounts of money. A broker will usually be free to use as they earn their commission from the (new) supplier. They can also look into "cost recovery" where they check that your existing supplier has been charging you the right amounts.
Charities complain that they are treated unfavourably by VAT regulations which mean that a vast amount of this input tax is irrecoverable and therefore treated as an input cost. However, there are many ways in which charities can take advantage of concessions that have evolved :
- Advertising. Since 1/4/2000, virtually all adverts placed by charities are zero-rated, including recruitment adverts
- Supplies of Gas & Electricity. Commercial companies pay at standard rate but charities can pay at reduced rate. If the charity can demonstrate that at least 60% is for non-business use.
- Partial exemption schemes, although complex to administer, will enable a charity to recover a portion of its input Vat on non-business activities
For any new commissioning or contracts, charities should strongly consider a full cost recovery method of allocating central support costs to projects. This will ensure that the new project pays a fair share of such costs.
Probably the two most significant ways of saving money are:
- Look at what is driving your support costs up. You should obtain records from your external provider (or in-house dept) and reviews ways that savings can be achieved. Sometimes this does involve a one-off cost (eg training or new equipment) but in the long run, will deliver savings
- Thin Client. Moving gradually to a thin client configuration where all desktops are connected to a server will save significant money on replacement equipment, software and energy costs
Charities are entitled to 80% mandatory relief and also 20% discretionary relief. To obtain the additional 20%, the charity has to complete an application with their respective local authority justifying why they should be considered.
Charities will normally get charged for the lease of the photocopier(s) plus an ongoing maintenance charge based on the number of copies. Suggested saving ideas are:
- The copier market is extremely competitive. Typically, contracts are five years in duration but after three years your existing supplier will look to tie you in with a new contract/new machine. At this point, it is a good idea to shop around to get the best deal, especially if you have a number of copiers.
- The variable support change is also competitive and you can opt for the same supplier (as the leasing company) or select another one. They will charge by black and white and colour copies. Check your invoicing for what you are currently charged and you can probably get as much as 1/3 rd off
- Reduce the number/quantity of copies. This will also save on power and stationery as well as storage costs. Typically, we print out too much and don't make as much use of electronic storage/filing as we should. This is also good for the environment.
Again this is a competitive market and staying with an existing supplier will usually mean that you are paying over the odds for your service. Again shop around or use the services of a telecom broker, ideally one that specialises in small-medium enterprises. Pay particular attention to high cost devices such as mobile phones and blackberries, ensuring that they are on the correct tariff package.
Engage with your people
Talk to your employees about cost saving opportunities. This is a good way of getting your people to work together in teams for the common good! Most people will like to be asked/engaged about the perceived inefficiencies/wastage in an organisation. There are various processes you can follow and one of these is outlined below :
- Appoint a project leader, preferable someone not in Finance, and allocate some targets and dates. You might want to give them a steer or start with a clean piece of paper and an up to date set of management accounts.
- Important you give this some high visibility and suggest that the results/recommendations are reviewed and agreed by your management team.
- The project leader should build a team and try and pick individuals from each area in the charity. Clearly a finance person should be in the team and can help provide answers to questions about current costs
- Generally good to use a technique such as brainstorming to generate ideas and then go through these in a more practical way
- Try and rank the ideas - high, medium or low or Must, should and c=Could are obvious ways
A lot here is focused on overheads. Most costs incurred by a charity, however, are delivery costs or direct costs. Sometimes, charities are reluctant to tackle these as there is a feeling that this would represent a cut in services to end users. There are various ways of assessing cost saving opportunities:
- Benchmarking. If your service is similar to services run by other charities, you can compare and contrast by looking at the free download service for annual accounts in the charity commission web site. Clearly you will need to be careful in making sure you understand both the volumes driving the costs (number of service users) as well as the costs themselves.
- Value. Look at costs that add little or no value to the end user. The best way of doing this is to break out your delivery costs and examine each component for value. This is traditionally undertaken by large manufacturing organisations but there is no reason why charities cannot adopt some of thee principles for service delivery.
Access Cost Saving Support
ACEVO's strategic partners and consultancy pool can provide help with most of the cost saving points outlined above. If you would like consulting support for your third sector organisation call 020 7280 4933 or visit www.acevoconsulting.org.uk