Thanks in advance for your interest in the KSM Profit Advisors blog. My name is Scott Grotjan and I am a consultant with KSM Profit Advisors, a cost reduction consulting firm.
There are areas in every organization that are not receiving the value they could. KSM Profit Advisors has the experience and know-how to identify these areas within your organization. In fact, our consultants have never been involved in an engagement that did not result in cost savings for the client.
Cost reduction and profit improvement work is some of the most rewarding work with which I have ever been involved. More often than not, my clients start out stating they do not need our services. Over time and after sustainable cost reductions for their business, they become a client for life. Ultimately, if I energize one person or company to action, I will have achieved my goal.
CFO Research Services, in collaboration with American Express, released a report last month titled Cash and Working-Capital Discipline, which describes the financial obstacles for the finance team at mid-size companies.
The report identifies the loss of bargaining power with vendors as the most prominent obstable to improving cash and working-capital:
"... companies seek relief from the pressure they feel on the sales and collections front by extending payments to their own suppliers and vendors, creating a ripple effect of more-robust collections efforts and extended-payment negotiations throughout the broader population of firms."
For help reversing this trend and increasing your bargaining power, contact KSM Profit Advisors.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
If your business is considering steps to "going green," grant money is available. The Indiana Department of Environmental Management's Recycling Market Development Program is designed to aid private businesses in purchasing equipment needed specifically to remanufacture recyclable materials into finished products or industrial feedstocks. The grants range from $25,000 up to $200,000 with a required 50 percent match.
Grant money that helps you reduce costs and is helpful to our environment. Everyone wins!
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
Ideally, the title to this article caused you to pause and consider the concept. What happens when you don’t know what you don’t know?
Most companies feel secure in what they’re paying for products and services when, in reality, what they’re paying is likely well above market price. Helping companies better understand this is the basis for our cost reduction and profit-improvement work.
One of the most powerful tools that comes from cost reduction consulting is benchmarking – the knowledge of the market price that similar companies are paying for the exact same product or service. How does the price that your company pays compare to the market price? This benchmarking process involves many facets such as bottom-line price, contract compliance, incentives, and efficiency improvements. In order to improve, you first have to measure where you stand today.
Here are two examples of recent profit improvement programs that our team implemented:
- A logistics company engaged us to review a handful of expense categories, including forklift propane. During our discovery phase, we uncovered two crucial areas that would result in significant cost savings. The first, their CPA firm (not Katz, Sapper & Miller) overlooked a credit that was available on forklift propane. Once corrected, our process resulted in significant savings. The second was the actual price for forklift propane. Our work in this area will save them almost six figures annually. Combined, our client will enjoy more than $500,000 in profit improvements.
- A physician practice group used a laundry service to launder their lab coats, patient gowns and facility linens. The prices and components of their vendor invoice were ripe with opportunity. We corrected these, and this client is now realizing a consistent savings of 48% each month.
Our cost reduction work is done across most expense categories, and we have clients all over the United States. Many times we will see a vendor offering “something better” in another geographical region. Our work will help bring these savings back to you.
Many times our clients tell us, “We never would have found that on our own.” When we hear this, it always brings us back to the beginning – what happens “when you don’t know what you don’t know”?
What you don't know could be costing your company; perhaps significantly. Accept your blindness and you might well have better sight.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
Most organizations have vendor purchasing agreements - an agreement that notes how much you pay based upon the purchase volume.
During the course of our ongoing work for a client, we recently discovered an issue (error) with the vendor complying with purchasing agreeement terms. In this case, we were auditing for compliance with carrier usage on the transportation side. Over the course of our work, we were introduced to a much larger issue: Compliance with the purchase agreement terms.
This client's purchase agreement terms indicate that freight is included for the merchandise being purchased if the merchandise is over a certain dollar amount. Under that threshold, our client is responsible for the freight charges. We audited shipments for which our client paid the freight charges and found an error in 34% of those shipments. This freight should have been billed to the vendor's (shipper's) account.
You might wonder why someone didn't catch this. The invoice from the vendor showed the freight as "prepaid and allowed." Therefore, the AP folks would never know to look. The bill of lading on the shipment from the vendor showed the charges as "freight collect." The company that audits the freight invoices shows these as being billed correctly. Therefore, everything checks out just fine.
Keep in mind this is a long-standing client, and we have access to both the invoices from the vendor and invoices from the carrier. Our team performs a compliance audit and finds thousands of dollars in freight that our client should have never paid. The vendor has graciously agreed to issue a credit to our client for the errors.
Who's checking your vendor compliance? If you are not sure, you might consider reaching out for help.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
If your company is involved in manufacturing, most likely you are involved in packaging.
The cost impact of your packaging is reflected on many lines of your financials. Two large impact areas include:
- Material Specs: This is the most fundamental part of the process. The materials must meet your needs in order to protect your product as well as your brand. You should always evaluate alternative materials that help meet or exceed current specifications.
- Package Design: Design changes can have an impact to your costs both positively and negatively. If your company utilizes the outside of the packaging to transfer information to your customer, this too is loaded with areas that impact cost. For example, you might consider switching to fewer print colors. For example, if your box is printed using three colors, switching to two colors will provide instant savings.
The most recognizable cost of your packaing is on the invoice from your supplier. You might consider some other lines of your financials where packaging is found, such as transprotation, sales and labor. A small change in your packaging can result in a big financial impact. There are big dollars in small changes.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
While reading an article on the difference between management and leadership in The Wall Street Journal, I spent some time reflecting on the point the author was making: In today's economy, the line between management and leadership is blurred. "In the new economy, where value comes increasingly from the knowledge of people, and where workers are no longer undifferentiated cogs in an industrial machine, management and leadership are not easily separated."
A couple of differences which are noted in the article that I want to point out:
- The manager is the classic good solider; the leader is his or her own person.
- The manager asks how and when; the leader asks what and why.
- The manager is a copy; the leader is an original.
While I understand his rationale, his belief that management and leadership are no longer differentiated could not be further from the truth.
When meeting with companies to discuss our profit improvement strategies, I find there is a distinct line that separates the managers from the leaders. Managers simply maintain the resources given to them, not questioning whether or not improvements can be made. Leaders are proactive. They take steps to reduce costs and improve profits no matter the perceived risk.
Which best describes your actions? Those most often associated with the manager, or those of the leader?
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
Understanding workers' compensation insurance is daunting to say the least. Many components of this calculation can impact the rate you pay. Some of these components are:
1. Remuneration - The rate per hundred dollars of remuneration (most often payroll)
2. Classifications - Each classification applies to rate per hundred based on the varying exposure to injury. For example, the roofer is more likely to be exposed to injury compared to the receptionist.
3. Experience Modification Factor - An adjustment to your premium based on prior losses.
Based on past experience, we have determined that more than 70% of employers are overpaying or have overpaid on their workers' compensation premiums. Some of the warning signs of being overcharged include:
- Change in classification either positive or negative
- Change in business operations or scope
- Change in ownership
- Change in employee leasing/contractual employees
Any of these can indicate an overcharge in your current or most recent premiums. If your company has experienced one or more of these, you might consider this a call to action.
KSM Profit Advisors will review your workers' compensation premiums on a contingency-fee basis. No recovery, no fee. Our work will make paying that premium a little less painful.
Is your company in the 30% that is
not overpaying?
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
"The creditor hath a better memory than the debtor." -James Howell According to the
American Bankers Association, credit cards are responsible for more than $2.5 trillion in transactions a year and are accepted at more than 24 million locations in more than 200 countries and territories.
Your business likely processed your fair share of that $2.5 trillion. You likely experienced an instant reduction to your bottom line in the form of processing fees for the convenience of accepting those credit cards. How do you go about minimizing that expense?
Here are some questions to consider about your credit card processing:
- Do you own or lease your equipment?
- Are you on a tiered pricing structure?
- How can you ensure the transaction gets the lowest possible transaction cost?
- How does PCI-DSS impact your settlements?
If you know the answer to all of these questions, stop reading. If not, consider reaching out for help. More than 90% of the time, our clients will realize a savings on their credit card processing fees. Often, this is without even changing their processor, which means a little more green for you!
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
We recently had an inquiry on our position that most times reducing expenses is a much quicker improvement to the bottom line compared to growing sales. In reflecting upon this, let me share with you this example:
| Currently | w/ Expense Reduction | w/ Additional Rev |
| Revenue | $100,000 | $100,000 | $140,000 |
| Expense Reduction % | 0% | 20% | 0% |
| Operating Margin % | 10% | 10% | 10% |
| Net Income | $10,000 | $14,000 | $14,000 |
To get the same net profit, you can reduce your expenses by one dollar, or grow your revenue by $40.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
When talking trash - literal trash, not the stuff you say on the golf course - there are many things to consider.
Do you know the answer to the following questions as they relate to your business?
- How full are your containers when emptied?
- How often are your containers emptied?
- Is your container sized correctly for your business?
- How does your recycling program impact your monthly expense?
If you are not sure, don't despair. We can help! Waste is not only an area that KSM Profit Advisors works on consistently, it is an area in which we see a lot of success. We provide extensive analysis of businesses' waste removal programs, and we make recommendations for improvement and implementation. Most always, our recommendations will reduce your waste invoice by more than 20% - proof that there is cash in your trash!
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
In today's economic times, driving sustainable cost reductions is just one of many challenges, and driving them through contract compliance is sometimes an overlooked opportunity.
Nearly every organization has experienced "creep." That is my term for what happens to the savings a vendor promises that never materializes. Some might call it savings leakage or deliberate contract manipulation. However you describe it, it is not good for you or your business.
There are many aspects to contract compliance. Some of these include credentials, tiers, terms and prices. Each of these areas, if audited, can lead to sustainable cost savings. Contract compliance is one of the many features that our engagement with a client offers on a long-term basis. While each engagement varies from client to client, we perform a "roll-up-your-sleeves" approach to ensure that "creep" stays where it should.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
As everyone knows, there are huge budget shortfalls in education. A simple Internet search will yield countless stories, most all of them involving staff reductions. Granted, labor expense is almost three-quarters of their budget, but what about other cost reduction areas?
Below are some of the areas in where we have been able to help our education clients achieve their budgetary goals:
- Waste
- Utilities
- Supplies
- Equipment rental & purchasing
- Telecom
- Payroll-related services and taxes
I'm certainly not suggesting we can eliminate all staff reductions by engaging our company. However, our ability to save your district money is unmatched. This bold statement is supported by our fee commitment. If we cannot save your district money, we will not charge you anything. It's really that simple.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
In the March 18, 2011, 10-Q Quarterly Filing by FedEx Corporation is a brief reference to a US Department of Justice investigation into alleged anti-competitive actions:
In February 2011, we received a demand for the production of information and documents in connection with a civil investigation by the Antitrust Division of the U.S. Department of Justice into the policies and practices of FedEx and United Parcel Service, Inc., for dealing with third-party consultants who work with shipping customers to negotiate lower rates. We are also engaged in related litigation with one of these third-party pricing consultants. We do not believe that we have engaged in any anti-competitive activities, and we are cooperating with this investigation and vigorously defending against the litigation.
Both UPS and Fedex are excellent organizations and are extremely profitable. It seems that these carriers have taken notice of the organizations that help their customers reduce their transportation expenses.
At KSM Profit Advisors we regularly help our clients reduce their transportation costs. Many times the changes we implement are small changes that have more to do with helping our client understand why they pay $8.00 for this or $11.00 for that. We simply educate the customer about how to avoid paying that extra fee in the future.
More than once, I have attended a meeting with our client and the carrier and listened to the carrier explain how they (the carrier) have the client's best interest at heart. The carrier generally goes on to tell the client that they do not need our (KSM Profit Advisors) help because they (the carrier) are already helping them.
Isn't this the fox guarding the hen house? As a consumer, you have every right in the world to enlist someone to help. All vendors are willing to help, but they have no incentive to decrease their sales in order to increase your bottom line.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
Many times I get asked about cost reduction strategies for utility bills. Clients want to know what we can do for them in this area.
Here are three questions to ask yourself regarding utility bills:
- Doesn't everyone pay the same rate?
- Aren't all utility bills correct?
- Is there something I can do to reduce my rates?
If you answered "yes" to any of these questions, continue reading.
Every day, many companies overpay for utilities because the utility companies provide plans that are convenient for them, not cost-effective for you, their customer. The tariffs and regulations of the utility companies are ever-changing. Sometimes, it is almost impossible to decide on the best rate or plan for your business.
The utility companies offer other rates and programs that will save you money. However, they are under no obligation to share this information with you.
Could you obtain this information yourself? Certainly. But just as you should call a painter to paint your building, you should also talk to experts that specialize in helping companies save money. More often than not, our clients are overpaying for their utilities. Let's get that money back where it belongs.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
The Indiana General Assembly recently passed unemployment insurance legislation that will have an immediate impact on the premium rate for your state unemployment taxes. There are two parts to this new legislation: good news and bad news!
First the bad news. This new law creates a surcharge to the employer to help pay the interest due on the loan from the federal government. For 2011 this surcharge is 13% of your premium. Most likely you received a "Notice of Premium Modification" from the Indiana Department of Workforce Development. In this letter you will see the interest surcharge multiplier of 1.13. This is the 13% surcharge to help pay the interest on the federal note.
Now for the good news! The premium rates are reduced from the initial calculation sent earlier in the year. This new law moves the premium rate from Schedule B to Schedule E through the year 2020. The net impact to you, the employer, is a lower premium rate.
In summary, this new law is employer friendly. The federal debt is being amortized over a longer period of time resulting in a net decrease to the employer's unemployment taxes.
You don't have to face your state unemployment taxes alone. We have had many successful engagements with clients that resulted in a reduction of their state unemployment taxes. We have also provided guidance on the steps necessary to minimize these costs moving forward.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
A study commissioned by the Expense Reduction Analysts' Centre in the UK in September 2009 polled more than 1300 board directors and senior managers. The participants said their organizations had not employed any cost reduction programs for business expenditures in the past six months. Furthermore, nearly half (46%) had not conducted any contract renegotiations with suppliers in the past year, and more than half of respondents (56%) felt they could achieve cost savings of 6% or more for their businesses. All of this exactly when the economy was starting to decline.
Other Findings:
- 33% of respondents had measured cost reduction achievements
- 33% had benchmarked supplier costs in the past 12 months
- Less than 1 in 10 were very satisfied with their organization's efforts to reduce business expenditures
- 39% said a lack of time was the biggest barrier
The prime focus for companies in this study is the top line – with 57% of respondents stating increasing sales as the priority for increasing profitability. However, the study highlights that there is also a major opportunity to increase the bottom line by reviewing and taking action on day-to-day business expenditures, which, in many cases, has gone unchecked for a long time.
This begs the question: Is your business costing you? Grow your top line revenue or reduce headcount. Both are viable options But reducing your business expenditures is the fastest way to improve your bottom line.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
Recently, Business Week published an article on what the tangible impact of sustainable business practices are and why they are becoming attractive for CEOs. The intangible impact can hardly be ignored either as both provide cost savings.
Sustainable business practices are what many consider "out-of-the-box" solutions. Many times the return on this type of solution is comparatively substantial to an "in-the-box" solution and should be considered.
For example, corporate giant PepsiCo’s Frito-Lay unit is putting 176 all-electric box trucks on the road throughout the United States. The trucks are expected to cut PepsiCo's diesel consumption by 500,000 gallons a year. At $3 a gallon, that’s a $1.5 million annual savings.
At KSM Profit Advisors, our cost reduction strategies include both "in" and "out-of-the-box" solutions such as these with an ultimate goal of improved cash flow for our clients.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
"Failure is not fatal, but failure to change might be." -John Wooden
Recently I was researching spend analysis and came across a study completed by the Aberdeen Group. Although the findings were released September 2004, I believe they are still very applicable:
• Spend data management is critical for supply management and business success.
• Insufficient visibility into spending is a corporate epidemic.
• Hurdles to spend data management include disparate data sources; inaccurate and incomplete spend data; limited category expense; incongruent naming conventions; and limited analysis tools.
• Improving spend data management offers measurable benefits.
At the time the findings were released, Aberdeen estimates that inadequate spend data management was costing businesses $260 billion in missed savings opportunities annually. Considering the GDP growth rate, that number today could potentially represent $280 billion in missed savings opportunities in 2010.
An effective spend management process can yield big dividends straight to your bottom line. If you have ever wondered how your company compares, this might just be your call to action.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
"It's not what you look at that matters, it's what you see." -Henry David Thoreau
In my consulting practice, our goal is to improve the profitability of our clients. I often hear prospects tell me they are part of a buying group or purchasing cooperative and that they have no need to consider cost reduction consulting. They are “in good shape.”
Every time I hear this I am reminded of a New York Times article, “Hospitals Find Buying Groups May Not Come Up With Savings.”
I am not minimizing any buying group or purchasing cooperative activity. These organizations have, in fact, provided their members with savings. My goal here is fairly simple. As the quote above notes, it's not what you look at that matters; what really matters is what you see.
Our economy was founded on free market principles, and these still apply today. If you have not market tested your price for supplies or services, you should. You might be surprised at what you see!
Just as you hire a CPA firm to do your taxes or an attorney to represent you in legal matters, you should hire an expert to review your consumable purchases of products and services.
KSM Profit Advisors, an affiliate of Katz, Sapper & Miller, helps companies increase profits and become more competitive by reducing costs through innovation and improved efficiency. For more information about how KSM Profit Advisors can help your company, contact Scott Grotjan at sgrotjan@ksmpa.com.
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