Some easy ways to control your daily office expenses.

September 1999

by Arleen Kahn

When it comes to cost management, the everyday expenses are often overlooked. Consider the following tips when trying to cut your business costs without compromising quality or thinning your staff:

Service Contracts
Typically companies pay anywhere from $3,000 to $40,000 per year on service contracts for office equipment such as copiers and telephone equipment. However, this is rarely cost effective. If repairs are necessary, it’s more efficient to pay for time and materials — even as much as $175 per hour — because you’ll save money over time. Some service contracts are advisable, but be cautious.

For example, most telephone service contracts include the console or PBX as well as each individual telephone. Though insuring the console is advisable, there is little need for coverage on the phones. When leasing copiers, it is wise to insure color copiers due to the added complexity of the machines. Black-and-white copiers are simple enough that repairs are rarely necessary. Note: Signing a service contract that is incorporated with the equipment lease agreement technically waives your 90-day warranty.

Messenger Services
Messenger services are a sizeable annual cost item for big-city companies. Typically, the cost of delivery is broken down geographically by routes. Try to negotiate a broader delivery range, and pay a flat rate per package, regardless of where the package is delivered.

Equipment Leasing vs. Purchasing
Leasing is advantageous for large items because it gives you the flexibility to upgrade or downgrade. Even if you downsize and need to end the lease early, you still come out ahead — had you bought the equipment and then tried to sell it, it would have depreciated in value. Furthermore, even if you need to end a lease early and have to pay off the balance, you get a break on the interest. For example, one of my clients bought three copiers, downsized his company two years later and now owns two extra copiers, which he does not need. Leasing allows companies to adapt equipment to keep up with growth or changing needs. Another consideration: With the ever-changing technology, keep leases short — never more than 36 months. And as for smaller equipment such as fax machines and printers, purchase. The cost constantly decreases, and the technology does not change that rapidly.

Equipment Insurance
Leasing companies will always charge you for equipment insurance. However, if you register it with your insurance broker it can be put on your current insurance policy. In order to avoid doubling your insurance coverage on the equipment, since most liability insurance will cover it, request a Certificate of Insurance (COI) from your insurance broker, and submit it to the equipment leasing company.

Office Supplies
Avoid brand names, and buy generic. Many are manufactured by the same companies. For example, 3M manufactures generic Highland Post-its as well as Post-it notes and Scotch tape. Even on copy paper, the savings is enormous — purchase generic paper at $29 per carton as opposed to name-brand paper at $44 per carton for a saving of 34%. And remember: Buying from a single source increases your purchasing power. Larger companies that spend $75,000 per year or more can negotiate corporate rates from major suppliers like Staples and Office Depot by working with an account representative. But smaller companies can increase purchasing power as well by dealing with the right suppliers, such as local supply companies and other companies that base discounts on volume and negotiation.

The Bottom Line?
Scrutinizing common expenses and putting these tips into action will help you increase profits. By cutting costs, you will enhance your bottom line and have more money to grow your business.

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