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Thursday, September 1, 2011

Reducing the Budget Risks


As Saver-in-Chief of your organization, you as the CFO know exactly where the dangers to the corporate budget lurk.

Your business might be labor-intensive (like a law firm) or asset intensive (like a leasing company) or both (like a hospital), but in every business there are “big ticket” spends that you’d like to optimize for saving. Cost drivers differ from business to business, but there are common areas that nearly all companies are interested in.

Submitted for your consideration, here are several big ticket areas common to most businesses, along with some suggestions for how to save on these expensive, yet necessary, areas of your business:

Telecom

With the move to nearly all digital telecommunications, which include data, voice, and mobile/tablet devices, big carriers have had to invest billions in building up mobile and fiber-optic networks. The cost of those systems is being paid by, well, your company and many others. Unfortunately many companies lack visibility and control over their telecom spend. And the more the company grows with multiple offices across many states, the more time consuming and labor intensive it becomes to manage the complicated infrastructure.

Nowadays, often only Fortune 500 companies can dial up the volume discounts that help to reduce costs and increase efficiency. These large companies are able to afford the typical approach of Telecom Expense Management firms, which is to charge expensive software licenses and professional services fees to companies to manage their telecom through a single, online dashboard.

However there are other unique options of TEM that mid-size companies can afford. For example, a company called vCom Solutions provides the software and professional services for free. No charge. Instead, vCom distributes the carriers’ services — such as Verizon or Sprint — to its customers and uses its wholesale buying power to pass along savings.

Gary Storm, CEO and founder of vCom Solutions, said that the high cost and complexity of telephone bills and service hassles with the phone company are making the carrier direct model cumbersome and obsolete. Tomorrow’s businesses will expect telecom service to be a low-cost commodity with the invoicing and carrier relationships left to a management firm.

“From our company’s earliest days we recognized the significant transformation that was going to happen in telecom,” said Storm. “It’s why we continually invested in the development of software-as-a-service products. Technology has now reached a point where the transition from a ‘carrier direct’ model to a ‘distribution’ model is happening.” 

Energy

Sure, you know about and implement (or maybe produce) energy efficient products and sustainable practices, but there are some eye-popping developments out there lately that some companies are using to take themselves off the energy grid completely.

Take for example, the Bloom Box, a device introduced last year that major companies like eBay and Google are currently testing. The Bloom Box purports to save up to 20% of the energy a company consumes and take your company partially off the standard grid (and maybe someday completely). While the jury on Bloom Box technology is still out, the investment of $700 to $800K per unit appears to be quickly recoverable depending on the consumption profile of a business.

There are of course the usual steps you can take to reduce consumption by installing energy efficient equipment and alternative energy sources like wind and solar. There are energy consulting services that can support your need to reduce consumption. These services provide things like energy budget development or energy accrual and variance analysis that help you more accurately understand your company’s consumption patterns.

As in telecom, there are cloud services that provide dashboards that enable your facilities professionals to closely monitor consumption and which can help you forecast for budget purposes.

Employee Benefits

With national healthcare reform being phased in, we predict there will be more competition for a broader range of patients, meaning that prices for employee benefits may trend down over time.

There are consulting resources that can provide techniques of hedging and for benefit plans as well as other employee benefits such as life, disability and workers compensation insurance; and, there are funding alternatives that reduce, delay or provide tax benefits to offset these liabilities.

Of course, there’s still old-school negotiating with your providers. If our belief that healthcare reform will set off a competitive situation, your negotiating power will be greater on your healthcare costs, which are typically the biggest spends within an employee benefits program.


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