Every business wants to be competitive on the prices that they charge. Well, from my viewpoint running a company for more than 46 years, I concur that price is indeed vital, but cost is even higher on the scale.
What’s the difference? “Cost” considers the full expense of a transaction. This includes the price, freight, ordering, convenience, receiving of the goods, distribution of the goods internally, entry into the company’s accounting system, and paying for the merchandise. We find that many companies are also separating invoices and charging various cost centers within the organization. So, if the invoices that are listed on the statement are already separated and subtotaled, overall cost savings can be achieved through less labor to record each transaction.
Cost centers can be departments, locations, or any other way that businesses try to get more granular so that they can see “where the money is going.” At WJ Office, we’ve invested in software that allows our clients to easily manage this task. Additionally, we have found ways to improve the requisition process that plagues many organizations.
Some companies have a person who places orders for office or cleaning products. The purchaser may get an email or a Post-it note to order a particular item. Some purchasers complain that some employees simply say, “get me what I got last time.”
She might research pricing among multiple vendors (after she’s looked up the item number). Meanwhile, she has several other responsibilities that she feels are even more important than ordering supplies and she’s getting these requests from several fellow employees.
We’ve found that having an approved “favorites list” can eliminate a significant amount of “looking up” an item number. We have also helped many clients to set up multiple users who can access those favorites, place the order, and the purchaser can review, edit, and release those orders. If cost centers are being used, each user would be assigned a cost center designation as well so when the order comes in it can go directly from receiving to that individual or department. The billing is organized so that invoices don’t have to be broken out into different general ledger/departmental categories, and the “soft costs” that are not part of the price but definitely part of the expense may be reduced and managed more effectively.
WJ Office has been doing this for a long time with some customers that have 50-100 different departments. Invoicing and statements can be emailed and payments can be received by WJ Office in whatever form works best for our clients (check, credit card, ACH, etc.). This process reminds me of one of our original taglines – “Our business is keeping your business running smoothly.”
Written by Neville Chaney