Recently, I had a client seeking assistance in reducing costs with a service vendor and it brought up three things to keep an eye out for with your vendor bills and contract:
1. Understand your bill. Anything miscellaneous always catches my eye. One client had 10% of annual cost be miscellaneous. As the customer, you deserve to know everything for which you are paying. If you are doing cost savings analysis, it is necessary to know where all monies are going. When items are billed as “miscellaneous”, you have no way of knowing if the item is administrative charges brought on by requesting more expensive services, like overnight delivery; or lightly veiled ways of the vendor increasing their profit. Either way, knowing what each charge is allows you to compare apples to apples when it comes to looking at other vendors or advocating for better prices.
2. Look at the contract for an explanation of costs. This is where it can continue to get frustrating. I have seen contracts where the “miscellaneous” services were explained, but there was no cost attached. So again, with it being all lumped together, you have no idea what that miscellaneous cost includes or even how often you are using the extra services.
3. Verify the proposals with your own data. This is specific to if you are considering signing an agreement with the same vendor. At this point, the vendor is writing a proposal based on your previous bills, so you should do the same. I have seen proposals that round up your previous monthly costs – which inflates the total year cost. Subsequently, when they propose a price increase, it doesn’t sting so much. Proposals can also exclude administrative costs, miscellaneous cost, and more. As I mentioned, one client had 10% of their annual cost with a vendor be in additional costs outside of their contract (miscellaneous costs). While these costs may be completely justified and have reason to not be on the proposal, it’s valuable for you to know the total cost so you can budget properly and know the real cost of the contract, should you decide to consider other options. Additionally, knowing any additional costs may allow you to recognize patterns in your company’s behavior and adjust the proposal to include extra rentals, overtime, and more – which should reduce your overall costs.
The bottom line is you become a better advocate and asset to your company when you know more about your bills and contracts. If you would like help determining the true cost of ownership for any of your vendor agreements, Silverback has a team of experts ready to help.