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Master the art of maximizing indirect spending savings

Master the art of maximizing indirect spending savings

When it comes to spending money on your supplies, there are a few non-negotiables. However, the areas where you can negotiate are far more numerous. And while it may feel like negotiating prices for paper and other office supplies is spending dollars in time to save a dime, the truth is that you may be stepping over those dollars by missing out on negotiating. According to a CAPS research study, indirect spending accounts for an average of 50 percent of business costs. Here’s how it can save more money than you realize.

What is indirect spending?

When it comes to business costs, there are two types of expenses: direct and indirect. Direct spending applies to supplies that go directly to manufacture products, such as coffee beans or other raw materials. Indirect spending is just about everything else that isn’t going into a product. Some examples include office supplies, computers, equipment, and furniture. The difference between indirect and direct spending when it comes to your business is that indirect costs don’t have an effect on what you are producing. That means you can treat it like a commodity and do cost analysis.

How can you save money with indirect spending?

With indirect spending, the consumer is in control. With a supply such as paper, for instance, competition is fierce. If you are unhappy with your supplier, it isn’t difficult to find someone new, and there is a field of different vendors and prices. Additionally, many suppliers use the same manufacturer, so your quality will be consistent no matter who you are using.

However, often these expenses are the types that get put on auto-pilot. Not a lot of thought goes into choosing a paper or janitorial supplier, and it’s treated like a one-and-done deal. Some of these costs equal a significant amount of your business and should not be taken for granted. Be proactive in negotiating your prices, and constantly evaluate your situation.

Your savings aren’t limited to office supplies.

Don’t only bring out the big guns for your paper and pens. While these are a significant volume of most business supply purchases, there are big savings to be had in other areas. CenterPoint offers benchmarking of certain indirect costs with no obligation for items you may not have considered. Some of these include janitorial and facilities supplies, telecom services (such as cell phones and plans), car rentals, and even gasoline and diesel fuel.

No matter what your business is, there is likely room in your indirect spending budget to get a better deal. Whether you negotiate yourself or utilize a GPO, you’ll want to spend some time going over the categories in your business.

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