“Because revenue projections are tenuous at best, my whole budget is stressful,” says Dennis Owens, director of environmental services for Memorial Hospital of Rhode Island in Pawtucket, R.I. “I never know how long the revenue will hold to budget and I have no control over that number. We will be asked at least once during the life of the budget to make cost saving cuts because revenue targets are not coming in.”

Planning for the fiscal year is — as Owens describes — a stressful experience. It is also something distributors can assist customers with. After all, most distributors claim customer service is a priority, but how many actually take the time to understand how their customers’ businesses operate?

To get a grip on your customers’ budgetary concerns, research how their budgets are created and implemented. Find out how end users’ departments are funded, who makes budget decisions, and when and how they spend allotted money.

Then use that information to become their partner in meeting and exceeding their budget goals. It will also help you in customizing sales efforts to suit customers’ particular needs — and in relieving a little of their stress.

End users truly appreciate a distributor that invests time and effort in learning about them. It shows that the supplier is interested in forming a mutually beneficial, long-term relationship, not just making a quick sale.

“Distributors need to provide the support and product services that my organization requires to operate,” says Michael B. Smith, senior custodial shift supervisor for academic custodial services at Western Washington University in Bellingham, Wash. “Suppliers need to know what I need and where to get it for me.”

Get To The Source
Budgeting is a complex equation. Every business is unique and so is every financial situation.

Some organizations, such as public universities and public school districts, rely almost exclusively on government funding. Others are funded through a mix of public and private dollars; most hospitals receive government reimbursements from Medicaid and Medicare programs as well as third-party insurance payments.

Private businesses, on the other hand, receive little or no government funding. Private schools and colleges rely heavily on tuition dollars. Hotels and resorts depend on paying guests to generate income. Property managers’ budgets are comprised of rent money received from tenants while building service contractors’ budgets are comprised of the fees they charge their clients.

City or county governments receive money from their tax bases in the form of real estate and personal property taxes, permits and fees and fines.

It is worthwhile to understand where a business’ income comes from because some sources are more reliable than others. A public school, for example, may not experience great budget fluctuations from year to year.

“We receive a set amount of operational funding that has remained fairly static with minor adjustments for the last several years,” Smith says.

A hotel, on the other hand, may see big swings in occupancy — and, therefore, income — within the same year. That means budgeting is like a juggling act for many end users.

“Our budget costs are broken down by total room counts and a percentage of revenue from each room goes to operational costs and supplies,” says Brian Purdy, building systems director for Wilderness Resort in Wisconsin Dells, Wis. “Our revenue does go up and down during the year, but this is taken into account when the final budgets come out.”

Budgeting 101
Regardless of how a business generates income, the process of creating a budget is usually quite similar. Each year, management creates a projection of income for the year ahead. They consider previous years’ averages and then factor in such variables as inflation, economic forecasts, rising or falling costs of such commodities as oil or paper, and changing labor costs.

While management is estimating future income, individual department heads typically must submit a proposed budget for the coming year.

“We have multiple steps in our chain of command,” says Jack Van Reeth, manager of environmental services for Geisinger Medical Center in Danville, Pa. “Individual departments must have their budgets for the next fiscal year submitted by late March. Then there are several steps those budgets must pass through before system-wide approval. Ultimately, the board makes final approval sometime in late April or early May.”

Housekeeping or maintenance departments have several expense categories to consider when preparing their budgets. Typically, the largest line item is labor. Van Reeth says about 87 percent of his department’s budget goes to wages and benefits. At Sharron Baucom Dale City Recreation Center in Woodbridge, Va., three-quarters of the budget is dedicated to staffing.

“Our facility is open 7 days or 104 hours a week,” says Sally A. Wood, the center’s general manager. “It’s very high use, so 75 percent of the budget is compensation to administrative staff or staff tied directly to providing a program or service.”

With so much money dedicated to personnel costs, there is often very little left for everything else. The remainder of a housekeeping budget is typically divided among supplies, equipment, outside services (such as window washing or pest control), training and repairs.

After the budget is approved, the department head makes most purchasing decisions. There may be exceptions to this rule — such as major capital expenses — but in almost every case, distributors should approach the department head about new products.

“My budget goes up the ladder but rarely gets changed unless there are facility wide financial issues and then I will be asked to make adjustments until they are satisfied,” Owens says.

Owens has the authority to purchase anything that costs under $500. Funds for any item over $500 comes out of the capital budget, which Owens does not oversee.

Owens also has no control over his business’ financial success or, in turn, over how much his budget grows or shrinks from year to year.

“My budget becomes dependant on how well the entire facility meets its revenue budget,” Owens says. “My ability to increase my department budget is dependant on the projected institution budget.”

Timing Is Everything
Understanding how a client’s budget operates may shed light on the financial obstacles they face, and allow a distributor to go a step beyond serving as a salesperson and become a problem solver. A key to doing this is being aware of the customer’s budget cycle — specifically the time when customers submit numbers for the upcoming year.

Businesses operate on varying timelines. The fiscal year may run July 1 through June 30 for a municipal government, and October 1 through September 30 for a hospital.

Determine the budgetary cycle of each of your customers and approach them with ideas at a time when managers need input from suppliers to help them create a realistic proposal for expenditures.

“We need to know about price increases at least three months before the budget begins,” Owens says.

A distributor who doesn’t know his clients’ budget cycles may miss the opportunity to make a sale or to establish an ongoing relationship. Likewise, it’s important to find out when the capital budget is finalized — it may be at a different time than the general operating budget.

“If our distributors are aware of some new developments in capital equipment — burnishers, scrubbers — we really need them to come to us as early as possible or it may be too late to get those items on the table,” Van Reeth says. “We must submit our wish list in February. If they come to us in May and June [when our fiscal year begins] it’s often too late.”

Visiting customers when they are planning their budgets is critical. However that doesn’t excuse a distributor from staying in touch throughout the year.

In fact, there are often established checkpoints, such as the start of a new quarter, when a manager has some freedom to modify his or her budget to make additional purchases.

“Third quarter is the time when agencies review how much money has been spent and how much money is required to get you through the remaining fiscal year,” says José A. Comayagua Jr., director of the facilities management department for Fairfax County Government in Virginia. “County agencies are expected to stay at the same appropriation level that they started with, but requests can be made for additional funding for unforeseen expenditures that have occurred or we know will occur.”

Be sure to ask customers about any other budgeting issues that might affect how or when you approach them.

For example, many government entities use competitive bidding and may require all vendors to register with an electronic procurement portal before they can provide cost estimates.

Also, more and more businesses are joining purchasing groups. These memberships may restrict a business to a narrow list of manufacturers. Distributors must know which businesses participate in which groups in order to provide pricing for approved products.

Make It Happen
When it comes to budget management, what do end users really expect from distributors? Simply put, the best price on every product. This demand is becoming even more important as financing and budgets continue to dwindle.

Also, because budgets are created based in large part on numbers provided by distributors, customers want to work with companies that will deliver on the promises made during the budget planning stage.

Every distributor is familiar with customers’ most basic requirement: they are always looking for the best price without sacrificing quality.

“Suppliers need to offer products that fit our budget and recommend products that are cost effective,” says David Cali, vice president of property management for Alfred Sanzari Enterprises in Hackensack, N.J. “Products or equipment that perform better or do a quicker job would be most beneficial to not only our tenants, but also our bottom line.”

Distributors need to “sweat the small stuff” when customers are setting pricing parameters in accordance with budget restrictions. Don’t overlook the importance of even the lowest-cost products — such as air fresheners and soap — to an end users’ budget. When dollars are tight, every line item is scrutinized.

“No cost is small,” Owens says. “We will search for the best price on any item. Distributors and suppliers need to know we are not flush with cash. Most people in the healthcare field have very tight and lean budgets.”

Establish A Bond
Just as no cost is insignificant, no price increase is too small to cause budget problems. To ensure an accurate budget, end users rely on distributors to provide accurate pricing estimates each year.

“A supplier can mess up my budget when there has been a price increase on a high-usage product and they delay telling me about it,” Owens says. “I will have to cover the increase in my budget unless I am told far enough ahead to include it in my proposed budget.”

Distributors should also make every effort to provide customers with a good-faith projection of price inflation over a one-year time span — not just a short-term estimate. Van Reeth expects his distributors to stay in touch with manufacturers so they can generate an accurate long-term picture.

In addition to giving reliable pricing on products, distributors should also let customers know about estimated shipping costs for the coming year.

Also, if you already have a relationship with a customer, be proactive by pre-ordering items before sharp price increases occur. Doing these things helps your customers look good and, in turn, makes them likely to stick with you in the future.

“The bottom line is most directors’ bonus plans are tied into meeting their approved departmental budget,” Purdy says. “If you go over budget by a certain percentage, you can say goodbye to your bonus.”

Becky Mollenkamp is a Des Moines, Iowa-based freelance writer and a frequent contributor to SM.

Helping Hands
End users have four main budgeting concerns — labor, training, purchases and cleaning needs. End users and distributors must become intimately acquainted with a facility in order to best perform these functions for the minimal price.

By becoming familiar with a customer’s facility — the square footage of the facility or facilities, number of rooms, flooring types, etc. — distributors can help customers evaluate where cost savings can be made. Compare this information to the history of the facility because a change in the facility can drastically alter a budget.

For instance, have traditional light fixtures been replaced by lights with sensors? Has tile replaced what was once carpeting? Has their facility expanded, requiring workers to clean more?

Distributors can be great partners in developing a “needs analysis” for facility managers. This analysis will help facility managers determine the building’s desired level of clean, and the frequency of cleaning and manpower necessary to meet that goal.

A needs analysis will take into account data on the building as well as high-traffic areas and impression areas, such as bathrooms and entryways.

In addition to evaluating the customers’ facility, review operations to determine whether there are cost savings. Sit with your customer to develop a time study for every task required to maintain a building. This calculation will outline the hours spent on each task on an annual basis, and possibly provide areas where labor can be cut.

Training cleaning professionals is a task most distributors already do. Many end users rely on distributors for valuable training, so if you have not already jumped on this bandwagon, expect to be pushed onto it soon, or be left behind.

Online Assistance
While you can assist customers in finding money savings, you can also help customers help themselves. There are several online services available to your customers that they may not be aware of.

ISSA and KnowledgeWorx promote Info-Clean, www.info-clean.com, a workloading program that will help them evaluate staffing and cleaning costs.

Another program, the Custodial Operation Self-Analysis Program, will help managers understand custodial costs and staffing levels. It is available through the Association of Higher Education Facility Managers (APPA) at www.appa.org.

A cost calculator, provided by ISSA, can be extremely beneficial to distributors looking to assist a customer through budgeting. This tool can be found at www.issa.com/paper.

Finally, the American Institute for Cleaning Sciences (AICS) provides a software application that will help facility managers re-evaluate their cleaning regimen to determine if there are more efficient cleaning programs that would be viable. This can be accessed at www.aics.com/daycleaning.html.

— By Corinne Streit, editor of Housekeeping Solutions magazine.