Profit News November 2009


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Profit News from Expense Reduction Analysts. Feature article is on the implications of the new business rating evaluation effective April 2010. Also information on Insurance, banking and travel.

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Profit News November 2009

  1. 1. PROFIT NEWS Inside this issue The Unfair Game Chris Aston introduces the new website that will be We expose the relationship between your insurance your portal to cost savings premiums, the insurers and the middle-men Cost of borrowing for SMEs SPA Researches Cost-Savings Stephen Whitlam explains why the bank bailouts Jo Lockett and Manoj Pabari discuss the diverse may not be lowering your banking costs range of savings that SPA was able to find FEATURE - PAUL GINESS BUSINESS RATES SHOCKER Property consultant Paul Giness urges companies to act quickly he majority of companies across the 30th November 2009 so they can reassess T UK, already battling against the economic downturn, have received another setback with business rates due to the rateable value. If you do not respond by this date you will end up going through an appeal process which can be rise significantly from next year. more time consuming. All businesses in England and Wales will • If you are unsure whether the new have received a letter during October rateable value is correct, look at getting a highlighting a new rating valuation of their review by an expert who will analyse properties, which will take effect from April your rent, the prevailing market 2010. The rating revaluation is carried out conditions during 2008 and advise if the every five years by the Valuation Office hypothetical rental value attached to the Agency (VOA) and rateable values on property more than a year ago was properties are used to determine annual accurate. The appeal window opens on business rates. They are calculated using a 1st April for proposals. In Scotland, hypothetical rental value, taking into appeals will have to be lodged by the end account property type and location,amongst of September 2010. other things. • If you have not yet appealed your 2005 It has been predicted that substantial assessment or there has been some increases in rateable values are likely in physical change to your site since you certain markets including offices in the City last appealed, it could be worth trying to and the West End of London, retail outlets in get a backdated saving. However an Reading and Bristol and industrial premises appeal must be lodged before the current in Bristol and Manchester. Schools and list window closes on 31st March 2010. universities will also be seeing increases. If the rateable value appears correct, Paul Giness, a Property Consultant with then there are a number of ways to off- Expense Reduction Analysts, says, “The set the costs of a subsequent rise in new rateable values have been calculated on business rates from 2010: the rental values of properties as they stood at April 2008, when they were near their • Look at increasing space utilisation, peak just before the economic downturn. sub-letting any space saved or claiming The issue is that the rental values of two empty rates relief on the space not used. years ago do not reflect the current market. However businesses need to be aware Experts predict that rateable values in that empty rates relief changed in 2008. landlord, such as dropping a break clause benefit of moving to smaller premises, is England will increase by around 19% Effectively there is now less relief to get out of the lease early, in return for you may gain extra rate relief, consider compared with the last revaluation in 2005 available than before as the Government a lower rent or a rent-free period. the following: and by 15 - 20% in Wales and approximately wants to encourage landlords and 10% in Scotland.” occupiers to bring empty property back • If your lease is coming up for renewal, • From April 2010, when the new rating into use. This means that most property consider moving to offices of comparable revaluation comes into force, you can Paul offers the following tips to businesses that has been empty for more than three size within an area of lower rent and rates. claim a sliding scale of small business looking to minimise the impact of the new months – or, in the case of industrial You can compare your rating valuation rate relief below the rateable value rateable values on their bottom line: property, more than six months - will with that of other properties in your area threshold of £18,000 (£25,500 in no longer receive relief from rates. In the or with properties of a similar type at London). Small business occupiers • Thoroughly review the letter and ensure majority of cases, empty property beyond Alternatively, simply should also be aware that this threshold there are not any obvious errors. For these relief periods will be responsible reduce the space you occupy if this is has just risen by £3,000 so if your new example, a warehouse on part of the site for 100% of the basic occupied business feasible and the landlord is agreeable rateable value from April 2010 takes you on which you are located may have been rate, although there can still be – remember it’s a buyers’ market in beyond the previous threshold of £15,000 demolished or you may not occupy the opportunities that could be worth commercial property at the moment. you will still be able to claim relief, whole space as stated in the letter. You discussing with an expert. assuming that it is no more than £18,000. FREE Cost will have an opportunity to put things right Finally, if you are a small company and if you act fast – the date by which you • Renegotiate the lease by exchanging do not currently benefit from small You can check the Business Link website Reduction must alert the VOA to any errors is something that is of benefit to the business rate relief when one extra for full eligibility details. GuideSEE INSIDE FOR DETAILS
  2. 2. INSURANCE - SCOTT INGHAM The Unfair Game lient’s select insurance brokers to be customer to know and obtain the best combi- a percentage of the profit from the insurers C trusted advisors who provide them with protection for their business at competitive market terms, and it would be a nation of insurer security, policy coverage and value available to them in the market. shifted to the broker in their commission levels. Unfortunately this has resulted in premiums being largely unchanged and reasonable expectation that they would The answer to this is no. Commercial customers renewing premiums which are no always do what is in the client’s best interest. insurance is a complex animal, hence the longer competitive. However, the insurance market is a highly existence of the insurance broker and why complex arena and brokers are tactical they are engaged in the first place. In today’s market, most commercial experts who know how to load the dice in premiums can be reduced if the risk is their favour. So where lies the problem? actively marketed by the broker. However, it is difficult for customers to know what the The Financial Services Authority has issued The collapse of The Independent, a leading real potential from the market could be, as words of warning in a recent newsletter insurance company, together with the attack the conventional market processes make it The report shows that the second most competitive terms by locking the markets. which was sent to general insurance brokers: on the World Trade Centre in 2001, saw easy for brokers to generate artificially high competitive insurer is £150,000 more To a reasonable person this may seem an “We continue to have concerns about market commercial insurance premiums change renewal terms and also lock out competition expensive. However, they fail to advise unbelievable situation, unfortunately this is inefficiencies, therefore, our further work will direction and create ‘super profits’ for from other brokers by influencing the prices the client that they receive 15% more a reality. investigate any possible problems in the insurers. The Independent were leaders in quoted by alternative insurers. commission from the incumbent insurer. commercial general insurance market before their field, but were underwriting terms With commercial insurance being so taking a view on commission disclosure.” which could not be sustained. The collapse Several issues are endemic in the market- Also the information provided to the complex, it may be some time before we This leads us to the question, is the current meant billions of pounds worth of insurance place. One scenario would be where an alternate insurers was in a format which reach the ideal of efficiency in the broker market efficient? If not, why not? Will business was available in the market and incumbent broker extensively markets a would only lead them either to quote costs marketplace. However, in the meantime, commission disclosure help efficiency? supply and demand factors allowed profit major personal accident insurance which would be uncompetitive or to decline help is at hand from Expense Reduction opportunity for other insurers. programme and presents a very professional the risk. This is done to achieve two things: Analysts to make sure you are getting the In the Broker market the word ‘efficient’ is renewal report to the client, with whom they firstly, to justify the recommended renewal best from your broker and the insurance used in the economic sense. In this context The knock-on effect saw brokers negotiating have a longstanding relationship. terms; and secondly, to prevent an alternate market, as well as security and value for ‘efficiency’ questions whether it is easy for a larger commissions from insurers. Therefore, broker from being able to put forward more your business risk. EXPENSE REDUCTION ANALYSTS SUCCESS STORY - TRAVEL - DEREK HODD WSPA overhauls its travel practice to ensure ‘duty of care’ and achieve savings he World Society for the Protection aspects such as not driving within 24 hours and this exercise showed that savings of 20- T of Animals (WSPA) has been promoting animal welfare for more than 25 years. The largest alliance of of an overnight flight. Without this policy in place, WSPA could be liable under both Health and Safety legislation and the 30% could be expected from a new travel partner, when compared with the prices offered by the previous TMC. animal welfare societies, WSPA has a vision Corporate Manslaughter Act. of a world where animal welfare matters, The benefits of the new policy, systems and and animal cruelty ends. “This meant that the travel project was quite TMC are manifold for WSPA. Complete a wide-ranging undertaking, but I have to visibility enables tighter management and “I cannot recommend Expense Reduction WSPA Senior Management Team had been aware for some time that their travel say that, throughout, WSPA was a pleasure to work with because they were very therefore reduced costs. The new TMC itself offers better prices and the policy protects Analysts highly enough. Derek Hodd has procurement was a cause for concern: they open-minded and receptive to my input. WSPA from liability and their employees transformed this vital part of our expenditure had suspected that they were paying more From the start, it was decided that I should from harm whilst travelling. than they needed to for their travel and act on a consultancy basis, rather than – we now have complete control over it, accommodation, and certain members of earning a percentage of their savings. This The next phase of the project is to automate and are realising some savings” staff were not happy with the incumbent is slightly less usual practice for Expense the entire travel expenses system, to give Travel Management Company (TMC). Reduction Analysts than the gain share WSPA an end-to-end picture of any trip – Henry Bennett, Finance Director, WSPA. arrangement but it allowed me to spend the from initial request, through managerial Chris Byron of Expense Reduction Analysts time I needed in developing WSPA’s travel authorisation, budgetary allocation and was managing the account and had already policy and procurement channel.” booking through to the capture and introduced his colleague, Derek Hodd, who integration of incidental expenses occurred was undertaking a print cost reduction Step-by-step, Derek implemented the systems whilst abroad. This will give WSPA a hugely project on a gain share basis. that WSPA needed. At the heart of this was valuable database of travel information. FREE Cost Reduction Guide Derek consulted with Henry Bennett, the concept of traveller tracking. Every piece of communication and every booking could Derek Hodd summarises, “Travel Finance Director at the charity, on the travel now be tracked so that management could procurement is not easy to control. It’s not Issue 3: Back Office Supplies project. Derek takes up the story: “My initial analysis showed clearly that WSPA easily see the location of staff in the case of any emergency and also that staff were acting like selecting a telecoms provider with a clear set of unchanging tariffs. The did not have an optimal travel set-up for within the requirements of the travel policy. purchase of every flight and every hotel Now available as a free download from their travel bookings. The incumbent TMC In order to achieve this, all online booking room is a separate operation and, as such, was not providing a good service with the was outlawed and a new payment method, is subject to inefficient handling and result that some members of staff were via a virtual credit card, was introduced so uncontrolled spending. WSPA’s openness Expense Reduction Analysts is pleased to booking their own flights and hotels online. that every transaction was visible. to change means that they now have a set announce the release of its latest cost This had led to a lack of managerial control of watertight policies, which will save reduction guide, focusing on Back Office over travel costs, losing the charity money. Complete visibility delivers significant them money, time and the risk of liability.” Supplies. Covering areas such as savings Photocopiers, Postage and Telecoms, this Employers’ duty of care an important Henry Bennett, Finance Director at new guide will help to ensure you are able facet of travel policy Derek Hodd explains the significance of WSPA, comments on the project so far, to make informed decisions and get the this: “If a staff member repeatedly refuses “We knew that we needed a travel policy, best value out of this, often neglected, “There was also the ‘duty of care’ to accept the best deal on flights and insists but without Derek it would never have business cost area. dimension to consider. I explained to on travelling on a more expensive airline, happened. We were very happy to retain WSPA that, since the Hatfield rail disaster, this is now immediately apparent to WSPA him on a consultancy basis, because, right This guide is available free from our brand the onus was now totally on the employer management.” from the outset, his knowledge of the new website to ensure its staff’s safety whilst travelling whole area was obviously superb. where you can also download our Banking and that consequently a travel policy should Once the policy was written, Derek created In addition, his tenacity in making sure and Property and Premises guides for even be put in place, covering everything from and distributed a tender document to select that each process was implemented is to more cost saving opportunities. when and how to book travel, through to a new TMC. The short-listed companies be commended. He has transformed this what to do in emergencies and rules on were asked to cost several sample routes, vital part of our expenditure.”
  3. 3. EXPENSE REDUCTION ANALYSTS SUCCESS STORY Advanced Resource Managers recruit cost reduction muscle Advanced Resource Managers Limited A good example of such improvement was Landline Communications was a category is a specialist technical recruitment the procurement of business cards within that also offered hidden savings once a and training consultancy providing IT, the Business Print project. The incumbent detailed analysis was performed. An initial engineering and business solutions jobs for provider took two or three weeks to turn review had revealed that Advanced contract and permanent staff throughout these around, involving multiple iterations Resource Managers was in contract with its the UK and Europe. of proofs and corrections. Expense incumbent supplier for a further nine months. Reduction Analysts introduced a web-based However, examination of the small print David Langston of Expense Reduction solution: this enabled staff to enter details showed that the contract did not require a Analysts takes up the story of the and proof cards online, reducing the minimum spend nor did it restrict supply to a partnership between the two companies. entire process to two or three days. single source. Further analysis showed that “I had identified Advanced Resource calls to mobiles constituted 70% of the total Managers as a potential partner in 2007 and Assisting ISO14001 accreditation spend and Expense Reduction Analysts was an initial meeting with Mark Gawthorne able to recommend a solution that resulted in revealed that he had used us in a previous Following the successful review of Business 48% average savings on these costs. role and was keen to do so again. Our Print, a detailed review of Marketing Print partnership started in earnest in October of was undertaken. This area was becoming Similarly, Sue Cooke’s first Office that year when we agreed a programme of more important as Advanced Resource Consumables audit revealed more than works to review Office Consumables, Managers were working towards ISO14001 was expected: savings on stationery and Business Print and Communications. A accreditation. This presented an extra computer consumables were only 10%, as Marketing Print project was added to the challenge, it was imperative that Marketing against a projected figure of 28%. programme in July 2008. Print suppliers should have very strong Through a line-by-line examination of environmental credentials, particularly in purchases, Sue identified which items Significant savings, streamlined service such areas as type of paper used, avoidance were being purchased off-contract and of chemicals, recycling of waste and then worked with key stakeholders to “I was fortunate to be able to work with adherence to green policies on energy and increase contract purchasing compliance. specialists in these categories from the equipment. This resulted in savings reported at Expense Reduction Analysts network (Sue subsequent audits coming into line with Cooke on Office Consumables and Keith Copestake found such a supplier, original projections. Business Print, Nigel Rosehill on Landline who was also able to offer significant Communications and Keith Copestake on savings. The material used for Marketing Mark Gawthorne sums up how working in Marketing Print). Such expert focus enabled Print is now Forest Stewardship Council partnership with Expense Reduction us to recommend changes that not only accredited and manufactured by a Analysts has benefited Advanced Resource Table of Savings Table of Savings saved money but also improved service and company that has all of the environmental Managers: “Expense Reduction Analysts business efficiency.” credentials required. has done a sterling job, as I knew they would. It is not only the savings that are Category Saving significant – a 73% saving on Marketing “Having previously worked with Expense Print is of course extremely valuable to a Office Consumables 31% Reduction Analysts, I had no hesitation recruitment consultancy like us – but it is Business Print 52% in sponsoring their partnership with us also the way that David and his team have Communications 48% recommended changes to processes that Marketing Print 73% here - confidence that was amply repaid have resulted in far more efficient and cost-effective ways of working.” by the savings they found” “A 73% saving on Marketing Print is extremely Mark Gawthorne, Finance Director, Advanced Resource Managers Limited valuable to a recruitment consultancy like us” ONLINE - CHRIS ASTON BANKING - STEPHEN WHITLAM New website now online It’s official! The Banks have increased the cost of borrowing But there are still opportunities to cut finance costs, says Stephen Whitlam, head of the Expense Reduction Analysts Banking Team The Bank of England recently published its Monetary Trends report for the 12 months to October and this shows that new business borrowing rates now average 2.5% over Base Rate for SMEs in the £1m to £25m turnover bracket. That is up by 0.5% on a year ago as banks have increased or, being contentious, perhaps just realised they need, profit The brand new Expense Reduction you stay up-to-date with all the latest margins. The chart on the right is from the Analysts website is now available at industry information and expense reduction report and shows the Estimated Median featuring all opportunities. These profiles are also Interest Rate Spread over Bank Rate on new the latest information you need to begin connected to Linked-In and blogs and news SME facilities. The trend appears resolutely the process of making business purchases feeds will be published on Facebook to upwards – mainly due to the costs banks work for you. It has been developed to act ensure our message is made available in themselves face for wholesale funds as as the leading centre for cost and purchase as many ways as possible. liquidity remains in short supply. The report management, focusing on the expertise of also shows banks have increased their our consultants and delivering the latest Informative videos, downloads and success fee/commission income. industry developments and opportunities stories will also be tailored to a visitor’s in one location. industry and location, enabling them to see The interest margins are probably here to how the Expense Reduction Analysts’ service stay at least until large scale liquidity Built with the aim of sharing our expert can benefit their business as well as finding returns to the global economy. But the knowledge with businesses, all Expense out which specialist consultants are available consensus view of the High St banks who that there remains competition for services focus areas are Card Fees, Cash Processing Reduction Analysts consultants have a in their area. contributed to the report is that fee growth that attract fees rather than interest costs, if and Cash Handling. Moreover, if clients dedicated page detailing their specialist areas will level off. Certainly the consistent one knows where to look and who to ask. have faced increases in borrowing margins of knowledge, career experience, recent Visit today experience of the Expense Reduction on Invoice Finance services (Invoice success stories and contact details. They will and start unlocking the cost savings within Analysts Banking Team over the last 12 In the battle to cut costs and improve the Discounting or Factoring) over the last 12 also be publishing their own blogs to ensure your business. months since the “credit crunch” took hold is profitability of our clients, our successful months, there can be scope to recoup these.
  4. 4. EXPENSE REDUCTION ANALYSTS SUCCESS STORY SPA researches the market in cost reduction “I cannot recommend Expense Reduction Analysts highly enough. Their specialists quietly and diligently get on with negotiating the best deals with the most suitable suppliers and present their recommendations in a simple to understand and succinct report” Jo Lockett, Chief Operating Officer, SPA SPA was formed in 1994 and is now one the expertise, but we also wouldn’t have had almost expired. Manoj’s colleagues worked of the larger full service independent the resource (staff and time) to draw them quickly and efficiently to ensure we got the market research companies in the UK. to a satisfactory conclusion.” best possible outcome even up against these SPA is based in central London and time constraints.” employs 50 people. Manoj Pabari continues: “I was fortunate to work with some very experienced More than just financial benefits Manoj Pabari of Expense Reduction consultants in these areas – Paul Miers on Analysts, who managed the client Office Supplies, Derek Hodd on Business Such expertise and dedication often means relationship, describes the background to Print, Brian Pinner on Photocopiers, Tom that Expense Reduction Analysts consultants his engagement with the market research Cooper on Communications and Keith can offer their clients more than just financial Jo Lockett, Chief Operating Officer, SPA and company. “When some of SPA’s clients Southwell on Utilities. They all found benefits. Tom Cooper describes an example Manoj Pabari from Expense Reduction Analysts started to cut their budgets and request significant savings for SPA.” in the provision of landline communications: discounts, they recognised that they would need to look at ways of stopping their net Complete experts in their fields “Communication is very important for a market research company, and they naturally Table of Savings Table of Savings margin from being eroded. Controlling wanted the best possible deal (I was able to expenditure more tightly than ever was the Jo Lockett agrees: “Expense Reduction offer a different solution, including bundled obvious solution. Analysts consultants are complete experts in minutes on a range of call types), but I was Category Saving their respective fields and what they don’t also able to deliver greatly enhanced service Office Supplies 38% Jo Lockett, Chief Operating Officer at SPA, know about their subject matter, be it photo- from their new supplier. takes up the story: "This is our second time copier, landline or utilities suppliers, you Business Print 47% using Expense Reduction Analysts and we could write on the back of a postage stamp. “In comparison with the previous incumbent, Photocopiers 31% were originally referred to them by one of They are by far the best placed people to SPA now has a landline provider who will our clients whose husband is an Expense negotiate any deals as they speak the jargon work with them, whom they can call in the Communications - Landline 27% Reduction Analysts consultant. We used and are fully aware of any of the suppliers’ event of any problem or question, and from Utilities - Electricity 11% them most recently on three projects that sales spin that may be used to persuade whom they receive an extremely quick ran at the same time. With these projects buyers to stay in contract. response. That is hugely valuable in their field.” running concurrently in very different enough. Their specialists quietly and understand and succinct report. I trusted their subject areas, it would have been folly to “We found that a number of the projects Jo Lockett sums up the benefit of SPA’s diligently get on with negotiating the best judgement and felt secure that the correct attempt to reduce these costs as an internal needed quick action, because they had partnership with Expense Reduction deals with the most suitable suppliers and decisions had been made with a minimum exercise. Not only because we do not have cancellation notice periods which were Analysts: “I cannot recommend them highly present their recommendations in a simple to amount of fuss on my behalf.” QUIZ - SUE ROBINSON So you think you are ENVIRONMENTWISE and know your NISP from 1 your WRAP . WEEE have set a quiz to test your waste knowledge. 2 3 1. What is the current landfill tax rate? 5. Businesses have a “Duty of Care.” 8. The Waste Batteries and Accumulators What does this statement mean? Regulations 2009 state that? a. £30 a tonne b. £20 a tonne a. That they have to provide a helpline a. Producers don’t have to pay for the c. £40 a tonne for their employees collection, treatment and recycling b. Ensure that all employees are happy of batteries. 2. What will the rate be by April 2013? in their work b. Producers only have to pay when c. They have to ensure that waste they there is an “R” in the month a. £25 a tonne produce is handled safely and in c. Producers have to pay for the b. £35 a tonne accordance with the law. collection, treatment and recycling c. £70 a tonne of batteries 6. What does “Pre-Treatment” mean? 3. What are the 3 Rs of Waste 9. You are considering a Waste Management? a. Something you would enjoy on a Management Review. Would you spa day a. Reading, Writing, Arithmetic b. Visiting a GP before going into a. Put this off until next April when b. Regulation, Restriction, Recovery hospital landfill tax will be £48 per tonne? c. Reuse, Recycle, Reduce c. The sorting of general waste into b. Wait until April 2013 when landfill recyclates and other waste tax will be £70 per tonne? 4. AD converts waste into renewable c. Or, contact Expense Reduction energy. What does AD stand for? 7. 30,000 Tonnes of portable batteries Analysts today? are discarded in the UK each year. a. Anno Domini What percentage is currently being b. Ant and Dec recycled? c. Anaerobic Digestion a. 1% b. 2% c. 3% 1. NISP - National Industrial Symbioses Programme 2. WRAP - Waste and Resource Action Programme 3. WEEE - Waste Electrical and Electronic Equipment The answer to all questions is c.