The start of the new financial year is upon us, and it’s the time when operational budgets for the upcoming 12 months are finalised and allocated. Regardless of the size of your allocated budget you need to get the most out of it.
Project budgets will have been calculated based on a recent analysis of the requirements. When was the last time you did the same analysis on your operational budget? It’s very easy to become caught in the trap of operational cost creep and find your allocated budget is inadequate.
It is easy to find advice on cutting costs in personal and commercial business budgets. There is also advice on how to achieve holistic savings across the economy. But how do you cut costs within a business unit constrained by policies and processes of a government department?
Here’s some simple, practical approaches that any manager can apply.
1. Review and Renegotiate
There will be supplier agreements in place for a range of services specific to your business unit. How long since these were renewed? Frequently agreements will be in place that have continued beyond the original contract term. The original contract price may not be the best price now available in the market place, but the supplier is unlikely to have felt obliged to inform you of this (just like your mobile phone plan).
Costs of supply for many suppliers have decreased over the past five years with improvements in technology. Printing costs, for instance, continue to reduce. Shop around and see what the current prices are.
Your current supplier may offer a better standard price now. If not, negotiate with them to match the best price in the market. It’s likely there are significant savings without even changing suppliers.
2. Purchase in bulk
Review the overall requirements for the year for items your business unit purchases. By reducing the number of occasions a purchase is made, and thus purchasing in greater quantity, there will be bulk supply and freight savings available. Calculate the savings that could be made. This will require gaining quotes from suppliers, and in some situations there may be a renegotiation of supply.
There does need to be space available to store the extra stock. Look carefully at where the biggest savings will be as it’s unlikely there will be the space to store everything you required for a full year.
Where storage space is not available commit to a minimum purchase for the year at a set price with the supplier. Guarantee it with a purchase order and most suppliers will be very happy to provide a reduced price.
3. Skill up
This is where spending money saves money. What professional services are you currently paying for? Most likely a few to support managing an EDRMS and other information management systems. These may be annual agreements or ad hoc service engagements. How frequently and consistently is the same type of service required?
Investing in development of team members can provide the capability to perform some of these professional services in-house. Development can be formal or informal, and in either case will require time to undertake, and support to utilise the new skill. In order to minimise risk of investing and losing the skill in staff turnover, the development needs to be backed up by documenting application and processes within your environment.
Be realistic about the capability of your team members to acquire all the desired skills. The reason consultants exist is because they hold unique abilities to problem solve and deliver solutions in specific aspects of information management. However by developing deeper skill and knowledge within your unit, the level of reliance on external services to do routine tasks will be reduced, and the capability to have “intelligent” conversations and make improved decisions will increase.
4. Control legacy items
Are there costs within your budget that simply should not be on your balance sheet?
Once relevant expenditures, over time, become less relevant. These may be subscriptions no one is using, to organisations or software.
Alternatively you may find that somewhere along the line your business unit has acquired costs that actually belong to other business units. For instance are you paying freight or stationery supply to some business units and not others?
Can a fully digital process be established that would negate the need for physical resources? Examine how you can lead the way in going fully paperless.
5. Build team collaboration
Staff costs are generally outside operational budget control, but the greater staff contribution to business unit goals, the greater the reduction in the purchase of additional services and contract labour. Investing management time in building team spirit will increase team output, and reduce unnecessary personal leave. I’ve experienced examples where dedicating time and effort to resolving poor team attitude has resulted in a 50% reduction of personal leave within a year.
Whilst long term budgeting is critical to managing costs and return on investment, you can take action within the current year budget to reduce costs. Direct the savings to those mini-projects that will make a longer term impact on efficiency and effectiveness.