With most organisations typically spending around 50% of their revenues with external suppliers, a professional and managed approach to this is key in today’s environment. Reductions in procurement costs flow directly to the bottom line.
In reality many businesses think about spend management the same way they think about a trip to the dentist. It’s a subject that, for many, invokes a blend of boredom and doom. ProVantage Procurement can help!
Different approaches to your profit margin
Day to day running costs, (usually the same for most companies – insurance, vehicles, buildings and buildings maintenance, utilities, IT, telephony and so on) often add up to 50% or more of the total costs for an organisation.
Surprisingly these are very often not given the focus that the ‘core’ costs that relate directly to the service or product you provide get and developing in-house expertise can be difficult and costly. Time and resources are limiting factors too with most indirect spend budgets being tacked on to the remits of individual departmental Heads.
The impact that these costs can have on your bottom line though shouldn’t be underestimated though.
- If for example, your income is, say £100K, the costs of creating this to your organisation are £80K, then simplistically your profit is £20K
- To increase profit via sales; if you increased sales by 20% your income is now £120K, the associated costs to get that go up proportionally so they rise from £80K to £96K – and your profit is now £24K
- However to increase profit by reducing costs; if you reduced your spend by just 5% from £80K to £76K, even with zero increase to sales your profit margin still rises to £24K
Both approaches increase the bottom-line profits to the same extent – which is easier?
How we work
We’re a small company of MCIPS qualified procurement specialists with over 100 years’ experience in the NFP, Financial, Service and Manufacturing industries.
We facilitate the cost reduction exercises, your supplier risk management and your sustainability agenda by providing decades of expertise across your direct and indirect spend areas, including drains-up spend reviews, supplier audits, Category Management, opportunity analysis and of course helping your tendering and contracting – including full Supplier and Contract Management once your contracts are running.
To date we’ve taken over £4M off the bottom line for our clients. To see if we can help with your outgoing costs, please contact us as below.