Most companies will always look for different ways to make more profit at the end of the day. When the potential for maximizing profit has been achieved, the other place they can take a look at is the running costs of the whole operation since this will also boost profits in the end. This is called an expense reduction exercise and, along with contract negotiation skills, third-party companies come in to push up profits to the maximum.

These companies have a lot of experience in the market place and what they do is to figure out what the industry norm is for this particular business. This is done in several ways but one example would be where the company does a lot of photocopying. Rather than buy in some rather expensive machines, it may be a better idea to lease machines so that the leasing company takes care of all the maintenance etc. Charged per copy, the buying company will certainly cut back on wastage and they will not have to employ anyone to physically stand at the machine all day. In fact, if this is a very large company, this would probably save expenses on salaries etc for ten or twenty people so there are definite savings to be had.

Another way is to look at things like roller towel hiring. One study shows that these are not only unhygienic these days, but getting in warm air driers will also save the physical cost of having cleaning personnel changing them several times per day, collecting them for the laundry company to pick up, and taking in the new ones when they arrive. All in all, a lot of time and expense on something for people to wipe their hands on!

In fact, these companies look at all the systems running and look for ways to cut down on wasted time, materials and anything else that affects the bottom line. If they can get outside companies to bear the capital costs, all the buying company will have to do is pay the contract rates and even these will be worked on by the third-party company too! Storage costs can also be inordinately high so it may be a good idea to rent storage space rather than use up valuable office space within the building. There are companies which specialize in storing documents for long periods and these are great for those companies who are forced to do this by law. Office space is very expensive these days so this may be a cost saving that the third-party company will come up with.

So finding a third-party company to come in and look at all the systems may sound a little expensive. However, if they can make extreme savings over the whole business, this literally should pay for itself without too many problems. I fact, it makes much better business sense than just spending without a proper feasibility study in the first place. Savings will also add up year on year from then on.

Author Bio: Ellie Lewis recently spent time researching expense reduction programs for a client who is in need of help. She signed her staff up to take a contract negotiation class in order to perfect their skills.

Category: Business
Keywords: expense reduction,contract negotiation