In most small businesses, at least one person reviews invoices and agreements to verify that you’re being charged the right amount and that, if an invoice has been paid, this amount has been deducted from the remaining amount due. However, you can probably benefi t from implementing a thorough system for reviewing these documents and ensuring that it is followed consis- tently. If you have a $5 million business, you might be able to save as much as $5,000 by reviewing these pieces of paper carefully.
Don’t limit your review to the purchasing manager. Identify an employee who has a knack for spotting mistakes or identifying numbers that simply don’t look right. This person should focus on specifi c types of invoices and purchase agreements looking
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for cost-saving opportunities. Here are eight potential actions for you to consider:
Review invoices from your freight and shipping companies carefully, watching for inadvertent mistakes. Most shippers are certainly honest and highly effi cient, but when you ship millions of packages around the world daily, the odds are that at least some mistakes will be made. For instance, if a company has a customer who is located on Elm Drive and the shipper inadvertently enters the address as Elm Road, they might charge an additional fee of $5 for every package sent to this address. If an error has been made in entering a shipping address, the only way to ascertain this fact is to review the bill itself.
Review lease agreements and lease bills. If you lease any type of equipment, recognize that these lease agreements contain fi ne print that can cost you money. For instance, we paid a lease on a fl oor scrubber for a year and a half after the lease period had ended. What had happened was that during our lease period, the lease had been sold to another company, which had fi ne print in the contract stipulating that if we didn’t inform them that we no longer wanted the fl oor scrub- ber, we would continue to be billed for it—which we were. As a result, we had the most expensive fl oor scrubber on the planet. Read your lease agreements and bills carefully and add notes to the fi le and to your calendar identifying exactly when leases are set to end. At that point, you can decide if you want to extend the lease or if you want to notify the leas- ing company that you’re fi nished leasing the equipment.
Make sure you are taking advantage of tax-exempt status.
Supplies for operating your business should be exempt from state sales tax. Some suppliers may not realize that your pur- chase is being used in your production and, consequently, may add sales tax to the invoice. This added charge can be 1.
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157 Hidden Opportunities: The Savings That Exist Beneath the Surface
as much as 6.5 to 7 percent, so watch carefully to ensure that your company pays only as much tax as necessary.
Read the fi ne print for all product and service purchases before making the purchases. This is a tedious chore, so if you don’t want to do it yourself, have a detail-oriented employee in your company take care of it. Most small busi- ness owners have a horror story about failing to read an agreement carefully and then in hindsight—and after a fi nancial loss—wishing they had been more diligent. We negotiated a deal to reduce the monthly cost on a mainte- nance contract for a piece of equipment, and a year passed before someone brought it to my attention that we were still being billed at the old, higher rate. When we complained to our sales rep, he pointed out a clause in the agreement stat- ing that disputes over billing had to be dealt with immedi- ately. In other words, when we received a monthly bill with the higher rate, we should have contacted him right then, and we would have received a lower rate. Because we waited a year, we were out of luck.
Make sure the numbers add up. In other words, make sure you’re getting the right quantity for what you’re paying.
Whenever you’re dealing with a quantity purchase—1,001 push pins, 548 tie rods, 25,000 brochures—the possibility of error exists, so don’t take the numbers for granted. At the very least, do a rough estimate to determine whether you’re being overcharged. For instance, an invoice we received from a bottled gas supplier listed 52 gas bottles for which we were being charged a monthly rental fee. That number didn’t seem right, and when we did a count, we realized we had only 41 bottles. This was another instance in which the supplier would go back only three months to give us credit for the wrong billing. Again, the fi ne print on the invoice said that the charges were valid unless they were disputed within a certain period of time. Over the course of a year, 4.
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this oversight cost us about $300. These types of mistakes happen all the time, and they aren’t malicious but are sim- ply the result of carelessness or misunderstandings.
Scan your phone bills for money-saving tips. Your telephone invoices are more valuable than you might think. From them, you can determine
whether your employees are spending an excessive amount of time on the phone;
whether your 800 number is being used—or abused;
who is making the most expensive calls monthly;
whether your employees are still using old long-distance calling cards, which can be very expensive; and
whether the phone company has included erroneous charges.
If you can’t determine the answers to these questions by reviewing your phone bill, then you need to request a more detailed invoice. If you’re using a broker for local and long distance service, then you probably receive a highly detailed bill. If you have diffi culty understanding your invoice, have a representative from your phone company stop in and explain the statement to you. It’s likely that you have at least one employee who is racking up signifi cant charges by making personal calls. It’s also likely that another employee is unknowingly costing the company more than necessary on business calls—perhaps by using a long-distance calling card that costs 43 cents per minute, instead of a disposable calling card that costs only 4 cents per minute. Sometimes, employees simply need to be informed about how much their phone time is costing the company for them to modify their behaviors and save the company money.
Our long-distance invoices are sorted by the time of day the call was made, the length of each call, the number that was called or that a call came from, the top ten numbers called and received, and the ten most expensive calls by 6.
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159 Hidden Opportunities: The Savings That Exist Beneath the Surface
phone number. If you want to know if your employees are wasting valuable time on the phone or you want your broker to fi nd a new phone service that better meets your needs, this invoice is your ticket for doing so.
Check your health insurance invoices for currency and accu- racy. When reviewing a recent invoice from our provider, we discovered that we were still paying a signifi cant amount for insurance coverage for a few employees who had quit months ago. Even though we had informed the insurance provider that they had quit, it had neglected to remove them from coverage. Many health insurance companies are bureaucratic and may be slow to update their records, so go over their invoices with a special degree of care.
Appeal your legal bills when appropriate. Law fi rms tend to be much better than some other service providers when it comes to accurate billing, but if a law fi rm makes a mistake, it can be an expensive one. Most small business owners use law fi rms for one purpose or another, and almost all of them have found and successfully appealed errors on their bills.
Sometimes the error is an excessive amount of time billed for a relatively simple or minor matter. Sometimes it’s a more blatant mistake—you’re charged for a service that wasn’t per- formed at all. Most fi rms are willing to listen and negotiate these mistakes. While they’re not going to bend if they spent 100 hours defending you in a major environmental lawsuit, they may be willing to accept that charging you $500 for a copy of a transcript is excessive and reduce their fee.