Whether leading a small-or-medium-size business, you can have the purchasing power of the “big” guys, if you know the secrets of negotia ask vendors the right questions, have a solid understanding of purchasing and know what’s negotiable – and what’s not. Many CEOs and CFOs are too busy managing their businesses to scrutinize phone bills ating and controlling costs. In order to get the best deal you need tond equipment leases. These “little things” can add up to hundreds of thousands of dollars per year. The most common spending traps involve office supplies, telecommunication and equipment leasing and service contracts.

Evaluating everyday expenses is a step in the right direction, but it can be overwhelming if you aren’t sure where to begin.

Here are some tips to consider:

Office Supplies
Use generic vs. brand names. Many are manufactured by the same companies. For example, generic Highland Post Its® are manufactured by 3M, which makes Post-It® notes and Scotch® tape. Also, create an order form for all contracted office supply items so you can verify that the negotiated prices are being billed correctly on the invoice.

When requesting reduced prices, base your numbers on overall expenses rather than discounts or purchasing a particular item in volume. It is better to get specific prices on individual items rather than higher discounts on your entire purchase, because not all supplies carry the same discount rate. And remember: Buying from a single source increase your purchasing power.

Equipment Leasing vs. Purchasing
Determine your business’s needs when deciding whether to lease or buy equipment. For example, it is better to lease a copier if the cost is more than $5,000, even if the lease is only for 1 year. Easing is beneficial for large items because you have the flexibility to upgrade or downgrade. But, with ever-evolving technology and changing needs, opt to keep leases short – never sign a lease that is more than 36 months.

When evaluating smaller equipment, such as fax machines or printers, it is best to purchase – because the cost constantly decreases, and the technology does not change as drastically.

After buying or leasing equipment remember to submit a Certificate of Insurance (COI) to the equipment leasing company to avoid paying double insurance charges. Most likely, your equipment is covered under your liability insurance. Request a COI from your insurance broker, and he or she can register your equipment on your current insurance policy. For example, Pitney Bowes lists their insurance coverage as ValueMax, which is often not identified as an insurance fee.

Shipping
Shipping services vary. So, know your vendor, and ask questions. For example, DHL (formerly Airborne Express) charges customers for a 5-pound package if the weight is not included on the air bill. Therefore, it is advantageous to have preprinted air bills with a 1-pound weight on hand. This poundage will be adjusted if the package weighs more or less.

Sales people usually don’t advertise their discounts, so ask what rates are available. A real corporate discount could save you $4 to $6 off the list price, including pickup.

Messenger Service
For many big-city companies, messenger service is a significant annual cost item. Try to negotiate a broader delivery range, and pay a fixed price, regardless of where the package is delivered.

Printing
Ordering in bulk saves money and time. For example, if you order 5,000 sheets of stationery, you will pay less per thousand than if you order 2,000 sheets. Just be sure that the text will stay the same for the 6-month supply. Typically, printers will store the excess and ship it as needed. You may have to pay for the individual shipping, but try to negotiate it to be built into the overall cost.

If you are thinking about engraving business cards or letterhead, reconsider. Thermography will give you a similar affect at half the price. Remember to ask the printer to “heat set” the thermography; otherwise it will melt when it goes through a laser printer. In case you are really trying to cut costs, consider flat printing – it is the least expensive option.

Telecommunication
If bundling your telecom services (voice & data) gives you a total monthly bill of $3,000 or more, you should consider a T-1 connection. Your per-minute rate will be significantly reduced, but you will be charged a reoccurring monthly fee.

Service Contracts
Many companies pay $3,000 to $12,000 or more per year for service contracts when it might be more cost-efficient to simply pay for time and materials – even as much as $175 per hour – if repairs are necessary. Some service contracts are advisable, but be cautious.

Never allow a copier dealer to base your copier production on your previous copy machine; instead use the 90-day warranty to average copier usage. Your business is likely to have heavier copying months, and a 3-month average is more telling of your actual usage. Note: Signing a service contract that is incorporated with the equipment lease agreement technically waives your 90-day warranty.

Negotiate overage copies on a quarterly or semi-annual basis, which will allow time to compensate for heavy copying months. Businesses tend to have heavy months and if you pay month-by-month, vendors will charge per copy for the overage. Negotiate a service contract on a year-by-year basis. And, keep in mind that the dealer makes money from the service agreement, not from the lease.

A Thousand Saved is a Thousand Earned

Knowing the jargon is a crucial factor in negotiations because vendors are more likely to work out a better deal. If you have an understanding of their products, you can expect and require more from them.

The bottom line? By making these minor purchasing changes, business owners like you can increase profit. Cutting costs will increase your bottom line and give you more money to grow your business.

Arleen Kahn is founder and president of AMK Associates, a Manhattan-based cost management consulting firm. For more information on how you can impact your bottom line through cost control, contact Arleen at 888-345-8008, amk@amkassociates.com or www.amkassociates.com.

 

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