80 Ways To Reduce Expenses, Part 2

By Dr. Michael Mahoney and Dr. John Crossley

Editor’s Note: This is the second 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.

Equipment and supplies can consume a large portion of the budgetary pie.

canstockphoto35953964

Where can you make cuts without sacrificing customer service? How do you keep up with the image the community has come to expect while staying within the confines of a shrinking bottom line?

Here are 20 ways to reduce the cost of equipment and supplies as well as related storage and inventory costs:

1. Plan programs that don’t require much--if any--equipment. Create a program where participants supply their own equipment (craft supplies, sports and camping equipment, etc.) for a reduced entry or participation fee. This strategy can be an incentive to those who continually bring their own program supplies and equipment to seek like-minded peers who otherwise might have balked at full fare.

Of course, some participants may become alienated by not being financially able to supply their own equipment and supplies, or worse, drop from participation completely.

2. Utilize hand dryers over paper-towel dispensers in restrooms. Instead of dispensing multiple towels, or handfuls per user, hand dryers eliminate expenditures for towels and reduce trash.

Bear in mind, however, there will be an increase in energy usage, as well as the potential for complaints from those accustomed to paper towels.

3. Lease or rent rarely used equipment. Track equipment-use patterns carefully, and note the most frequently used and least utilized (e.g., back-hoe, portable stage, cherry-picker truck, etc). Analyze several different programs or projects (current and upcoming) to determine frequency of use, as well as lease, rent, or purchase options.

A word of caution--if you are wrong and/or use patterns that change, you could be caught leasing or renting when a long-term purchase option may have been the rational choice.

4. Consider high-quality, longer lifecycle equipment purchases. “Institutional-grade” equipment purchases for facilities such as high-use municipal venues, etc., that are very client and/or community dependent, can be justified within the overall purpose and scope of the facility. The alternative is to pay exorbitant rates to rectify a poorly timed malfunction or system failure when the venue is booked for days, weeks, or months.

However, budgetary balance can change, so your strategy can backfire. Also, some administrators will not be happy about forgoing opportunities to buy used equipment without sacrificing quality.

5. Monitor and control employee use of supplies. Maintain a detailed inventory of supplies, and chart usage patterns by employees. This will allow for accurate planning, and discourage employee theft.

However, be aware employees may become upset with such procedures, as the free-flow of supplies is no longer acceptable.

6. Require sponsors of special events to provide equipment and supplies. This can work as an alternative to #5 or in conjunction with that strategy. Additionally, ask that the equipment and supplies be donated at the conclusion of the event. The additional resources may be utilized in upcoming activities, or provided to other community agencies.

This can become a challenge for special-event organizers, so be sure this practice is explained fully to event stakeholders.

7. Utilize “just-in-time” management. Avoid over-purchasing--buy only what you need. Save money by not paying for unnecessary equipment and supplies. The ripple effect of this approach shows savings by reducing unnecessary storage, reducing employee or customer theft, etc.

Be aware that some employees may resent this effort, claiming that buying in bulk reduces the risk of running low or running out of certain supplies (e.g., fertilizer, paper products, non-perishable food, etc.).

8. Train employees to conserve on supplies. In difficult economic times, many employees understand the need to conserve on household supplies and expenditures. It is of the utmost importance to instill a conservationist approach in the workplace by encouraging employees to continue to do the job right, but now adhering to a no-waste approach.

Purchase only recycled printer cartridges, eliminate printing unnecessary documents, and if necessary, print unofficial paperwork on those stockpiled reams of colored paper.

Employees may complain colored paper is not what they are accustomed to, so be prepared to communicate the rationale for conservation and the use of available resources.

9. Include equipment in grant proposals. The need to research, and submit grant applications is not only highly competitive, but extremely important in funding projects, activities, etc. Too many proposals are hastily written without including the need for specific equipment, or justifying the need for the equipment once the grant has expired. Give adequate attention to determine the realistic equipment needs based on grant longevity, and include within the application.

Note: Some supervisors may not authorize time allocation of employees to develop such a proposal.

10. Maintain equipment. Reduce expenditures by first determining whether to fix or repair equipment rather than replace it. Make use of a maintenance-management system not only to maintain warranties, but to plan for and conduct regularly scheduled service. Maintenance is critical, especially for the safety of all who utilize or rely upon its continued functionality.

Determining which equipment to repair or replace can be overwhelming. Additionally, you may have a wave of repairs that may not be a bad thing, provided you have an employee with expertise.

11. Examine any discounts for early payment of bills. Limit unnecessary charges or penalties by taking advantage of early or on-time payments. Many manufacturers and suppliers appreciate good customers by rewarding those who pay in accordance with the discount structure of the contract. When striving for savings, such discounts from early payment warrant this approach.

Keep in mind some people will not be able to take advantage of savings due to other expenditures, requiring scheduled payments over a period of time.

12. Consider co-op purchasing with other agencies. Seeking to obtain the optimum deal has reinstituted the concept of “co-op purchasing” among agencies that previously might not have desired business dealings with those outside their respective authorities. For instance, when negotiating for price-point discounts for solar panels, co-op purchasing can lead to lower rates and better installation fees.

However, be careful when attempting this--some agencies may think you are getting a better price/rate than they are, or that you are micro-managing the co-op purchasing relationship.

13. Sell old equipment. Some supervisors may retain old, unused equipment for 5 to 10 years past its prime. Without regular maintenance (refer to #10), old and unused equipment deteriorates and takes up much-needed storage space. Monitor equipment usability and use patterns carefully. Be proactive in redirecting (selling) old equipment to new users seeking to purchase equipment at discount rates.

Be aware that this may not be allowed for within the equipment justification under a grant.

14. Pick up equipment at the store. Rather than paying shipping/delivery costs, negotiate a discount to pick up equipment at the store. For instance, office equipment can be secured and transported via company vehicles. Be sure employees inspect the equipment and take photographs before loading to avoid broken or otherwise damaged goods.

Note: This may not be allowed for the job classification under a union contract. Be aware of the equipment dimensions and weight in order to better plan for the proper vehicle, etc.

15. Attend tradeshows, and negotiate directly with vendors for lower prices. When logistically and monetarily permissible, attend industry tradeshows--not only to keep current with the latest trends but to meet face-to-face with vendors. Schedule numerous meetings with individual vendors per your specific needs, and then negotiate the best deal among the competing vendors.

It’s possible there may be fewer tradeshow vendors than you anticipated and you can’t get the deal you want. Do your research in advance of the tradeshow by reviewing the vendor listing provided by the association or event organizer--then decide whether to attend or not.

16. Give “blems” a place. Research manufacturers and suppliers who offer discounted rates on slightly damaged products (e.g., doors, cabinets, etc.), or activity items with a cosmetic blemish (e.g., balls, nets, etc.). As with #15, attend tradeshows and ask product representatives for rates on “blems.”

If customers are not made aware of the “blem” savings, there could be some resentment of the equipment. Be prepared to educate others as to the real savings of such negotiations and purchases.

17. Solicit donations from local businesses and community agencies. Relationships are built, connections are formed, and the need to encourage community support is important. Some agencies can solicit donations from local businesses more easily than others. Express your needs (e.g., activity equipment, office supplies, volunteers, etc.) to businesses seeking to make a social impact within the community.

This creates a win-win scenario and reduces costs.

Since soliciting donations has a cost also, consider whether time and resources expended might be better utilized elsewhere.

18. Utilize competitive bidding for major purchases. Utilize a Request for Proposal (RFP) when attempting to obtain an unbiased and competitive bid. Appropriate time and resources are necessary to prepare a detailed and fair RFP for potential bidders. Be sure the RFP is well publicized in order to attract a wide range of submissions.

Some suppliers may decide on their own they are too small to compete, and thus won’t participate.

19. Make rational purchase decisions--buy only what is needed, not what you think you want. Be decisive when considering must-haves vs. nice-to-haves. For example, consider a fax and copier/scanner for the office as opposed to a scanner for each employee station. Think objectively about the potential purchase, and ask yourself, “Do we need it, and what are the potential benefits?”

Sometimes, governing bodies may suggest the purchase for political reasons, even though more efficiency may be found elsewhere.

20. Trade services for supplies. Think creatively about what “services” you might be able to trade for some supplies. For example, give a local grower, baker, or restaurateur a river-rafting excursion (for a set number of people) in return for a season of fresh fruit, baked goods, or private meals. Print shops are also good with such arrangements.

As with any agreement, get it in writing with terms, conditions, parties, etc.

Not every strategy will work for an agency. Some of the “adverse effects” can be serious enough to outweigh the expense reduction of the strategy. For example, one strategy leads to selling equipment that an organization may or may not need, and several other strategies seek alternative purchasing arrangements of equipment (co-op and competitive bidding), and another might go against the wishes of a governing board.

Also, some of the strategies require conservation of supplies, and what some employees consider micro-managing by monitoring usage patterns of supplies could also damage overall morale.

On the other hand, some organizations have a lack of financial oversight and years of broadening scopes, and they may need to control expenditures on equipment and supplies in these difficult economic times.

Therefore, you must weigh the benefits of each strategy with the potential adverse effects. Remember that rational thinking must be a part of every “acquisition decision” (bulk, liquidation, trade, “blems”, grants, etc.), and each has an impact on your budgetary balance.

Next Month: Reducing operating costs for contractual services, facilities, and capital equipment.

Dr. Michael Mahoney is the coordinator of the Sports & Entertainment Facility Management emphasis in the Department of Recreation Administration at California State University in Fresno.

Dr. John Crossley is the coordinator of the Recreation and Leisure Services Administration program at Florida State University in Panama City. Both individuals have significant managerial experience in recreation and event management prior to their academic positions.