Staffing may be your biggest expense but it is not the first area in which to identify savings. To kick off his cost-cutting series, John Baldaro suggests 10 ways to reduce housekeeping bills
Like every area of the public sector, GP practices are going to have to do more with less income over the next few years. Purchasing costs are rising and there are less than two end-of-year meetings with your accountant before the NHS funding freeze begins.
Staff-related costs are the biggest expense for any small business and it may be tempting to look at this first before other areas. But this is a rocky road and you should not underestimate the time and energy involved in tackling staff issues. There are easier ways to cut expenditure.
This series of articles will look at how to methodically review your expenses to create a reserve for tough times ahead.
In this article, the focus is on utilities expenses such as energy and phone bills. Medical, administration and finance costs will be covered in future weeks.
1. Improve ‘spend visibility’
The first step in any effort to streamline costs is to understand how much the practice is spending with each of its suppliers. Unfortunately, practice accounts simply do not provide adequate information on this.
For example, knowing that a practice spent £3,500 last year on stationery and office supplies might disguise the fact the practice used 10 separate suppliers.
A mid-size surgery might be using 80, 90 or even 120 suppliers.
Calculate the number of suppliers you did business with last year and how much of your expenditure they account for.
2. Reduce your suppliers
Once you have calculated this, the aim should be to reduce this number. A 20-30% reduction within 12 months is a reasonable target. Why? Fewer suppliers means fewer invoices, improved supplier relationships and better deals. Target your big suppliers and review their contracts. Can another supplier offer better value?
3. Review your contracts
Contract terms vary and businesses wishing to switch must check that they are not in a fixed-term contract with their existing supplier.
There are typically large savings to be realised by switching gas and electricity suppliers. There are generally two types of supply contract: 28-day contracts and fixed-term contracts. Practices on a fixed-term agreement are locked into the specified period of their individual contract, which can be one, two, three or even five years.
4. Make a contracts calendar
Most fixed-term contracts have a rollover clause, which means that customers who fail to terminate the contract before it ends are automatically tied into another fixed-term contract. Practices can give notice to their supplier at any time during their contract to say that they do not wish to renew the current agreement when it ends. Talk with your supplier to establish when you are ‘out of contract’ and serve an immediate ‘termination notice’: a simple letter on headed paper will suffice. If it helps, maintain a contracts calendar that lists these key dates. Set a reminder to act three months ahead.
5. Use price comparison websites with care
Price comparison websites are an increasingly popular option, with advertisers spending more than £80m promoting their products on such sites. On face value, they offer a convenient one-stop shop for energy deals and the like. You enter your details once and a website scans hundreds of products to find the best one for you. It sounds tempting, doesn’t it? But one word of caution.
Practices are too often unwittingly locked into extended contracts with these cheaper providers, offering indifferent value for money or poor customer service. Although price comparison websites might suit domestic users, business customers should consider getting expert advice.
6. Get independent advice
Brokers offer independent assessments of a practice’s phone spend or energy bills. By commissioning a detailed review of utility and phone bills, it is possible to reduce unnecessary costs and access competitive tariffs.
7. Look beyond BT
Phone costs present another good opportunity to make savings. Although most practices still use BT there are several alternative providers offering competitive line rental and call tariffs.
Again, consider using a specialist telecoms broker to review your bills and suggest changes.
8. Consider axing your fax
Removing a dedicated fax line and using fax-to-email technology can be
a good way to save money. We recently worked with a practice to remove two dedicated fax lines but kept their existing fax numbers. That way there was no change to the advertised fax number, but faxes were rerouted to a dedicated email account and could be printed as necessary. The saving was £250 per year.
9. Compare 118 numbers
Encouraging your staff to use a cheaper directory inquiries
number can reduce your costs. 118118 costs a minimum 88p per inquiry, whereas you can make two inquiries via 118226 for 23.5p.
10. Keep your options open
With all expenses, my advice is to avoid a lengthy contract. Keep your options open as tariffs change and new technologies emerge.
John Baldaro is director at PracticeProfit, a firm of purchasing experts working exclusively with GPs. To assess your practice expenditure and receive a free action plan, register online at www.practiceprofit.co.uk/report
John Baldaro says there are large savings to be realised by switching gas and electricity suppliers CASE STUDY
You can then click here for a case study of a practice that saved over £3,000 on their premises costs in one year.