BSCs Benefit From Conducting A Spend Analysis
Smaller contract cleaning companies may not be prepared for the cash flow problems that often result with business growth. One reason for this is many smaller companies do not pay attention to cost issues.
"However as they grow, they often experience 'too much month at the end of the money' and that can be very serious," says Tobi Colbert, business development manager for the National Service Alliance, a group purchasing organization for cleaning contractors.
The best way to avoid this and to reduce costs overall is to conduct a "spend analysis," according to Colbert. The goal of a spend analysis is to know exactly how much you're spending and where you're spending it.
Colbert suggests a good place to start a spend analysis is with janitorial supplies.
The following are the steps she suggests to take:
• Gather a year's worth of supply spending.
• Categorize the spending; cleaning chemicals and solutions; tools; equipment, safety products; etc.
• Analyze the data to see which product categories appear to be growing the most. "If one category, such as cleaning solutions, seems to be increasing significantly, look to see why and where this is happening."
• Analyze the data looking for savings. "What [product] purchases could be eliminated? Can a 'single task' cleaning solution be replaced with 'multi-task' cleaning solution? Are there invoicing errors, overcharges, etc.? Can some products be purchased in larger containers, producing a cost savings?"
• When are payments made? "Unless the supplier offers a discount if paid early, try to make all payments at the same time of the month; this can help avoid cash flow crises."
• How many suppliers are involved? "It's usually best to consolidate your 'spend' with the fewest number of suppliers to improve the chances of getting discounts and rebates."
• Select products purchased most frequently and try to negotiate better pricing with suppliers.
"Conducting a spend analysis is not a one-time task," Colbert adds. "Some larger companies do this every year to keep tabs on spending and to look for cost savings."
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