80 Ways to Reduce Expenses: Part 3

Editor’s Note: This is the third installment of a four-part series that will explore 80 ways to reduce operating expenses. In these difficult economic times, these ways could be the difference between having a profitable year and one of significant financial loss. After all, every dollar of reduced operating expense goes straight to the bottom line of an annual profit-and-loss statement. Take these suggestions at face value, or modify them for your agency. Either way, please take a look. Shaving a few dollars here and there might just save a job.

Think before signing on the line for contractual services.

Although contracts are meant to lock you into a fair market price for a service, they can also have the opposite effect if no one is minding them.

For example, prices may balloon while the services provided become sub-standard or non-existent. Although it may make sense to approve the same contract year after year, take a closer look before signing on the dotted line. Don’t assume the price is fair or the promises in the contract will come to fruition.

Here are 20 strategies to reduce the cost of contractual services and some of their ancillary costs:

1. Analyze insurance. Review the existing insurance policy and determine whether it “over-covers” current needs. When was the last time the policy was updated? Can you secure a “best-fit” policy with another provider for a lower fee or reduced deductible? Would a higher deductible be a better option? This strategy can be an incentive for management to annually review and update insurance coverage.

One word of caution: Some professionals may become overwhelmed or not allocate enough time to fully investigate the true needs and comparable insurance options, or worse, drop necessary coverage.

2. Improve safety records to reduce insurance rates. Training staff members, volunteers, and other stakeholders in the best practices of risk-management is important, but thoroughly documenting such trainings and incident/safety reports is essential. As such, reducing the number of incidents should show just cause to reduce policy rates. Instead of merely stating safety is of the utmost importance, show it via documented trainings and a chronological listing of all safety records.

The downside is there is an increase in time and allocation of resources for trainings and a safety-records database. Also, a chronological history might reveal an increase of incidents.

3. Contract accountant services quarterly only. Instead of monthly or bi-monthly assistance, contract this specialty quarterly to cut down on redundant costs.

This may not always be possible because some ownership structures or governance boards demand, at a minimum, a profit-and-loss statement on a monthly basis, and need more frequent reports for budgetary balance and financial oversight.

4. “Contract out” if a task is less expensive than producing in-house. Analyze project or program personnel cost patterns carefully, and track whether they can be completed at a reduced rate by an outside provider. Is the task weekly (e.g., landscape maintenance)? Event specific (e.g., catering or other food and beverage service)? Semi-annual (e.g., competitor rate study)? Is the task-completion rate comparable to a contracted regional provider?

Keep in mind, however, if you “contract out” and use patterns change, you may be caught paying more for additional contract staff, when the option of utilizing additional part-time employees may have been the rational choice.

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  1. 80 Ways To Reduce Expenses, Part 2
  2. 80 Ways To Reduce Expenses: Part 4
  3. 80 Ways To Reduce Expenses
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