In early 2020, the financial fallout after the COVID-19 pandemic looks inevitable. However, it managed to bring budget issues on the surface that set back the growth of many companies. In 2021, companies now want to be more concise about their facilities management budget.
The best course of action for businesses is to opt for strategic measures to cut back on costs. Besides, organisations can no longer be reluctant to shift their physical records to digital databases. In fact, it has become a new standard that would shape the future growth and innovation drive of organisations.
From housing to offices to buildings, the different sector has their own unique demands. Nonetheless, your objective should be to automate processes and adopt technology that can work as a customised solution and help you reduce organisational costs.
What Factors Influence Facilities Management Spend?
It’s been a long journey for facilities management and many factors can influence the budget. Oftentimes, companies feel the heat to decrease operating costs in a short time. On the surface, it sounds like a realistic plan, but it leads to little to no savings.
In fact, before you make facility budget plans, take into account long-term pitfalls and benefits. A progressive and dynamic approach allows facilities management to reduce cost in a realistic sense. Even amidst economic hardships, companies can trim down budgets of facilities management and have suitable rebounds in place.
Another factor you should pay close attention to is the poor condition of equipment and building that can add up a lot of costs over time. It is the main reason many industries now outsource different kinds of in-house operations to save time and money.
As long as the operation is not essential, you will need to consolidate its costs. Opt for a standardized approach and combine facilities tasks to get the best results. However, the last thing you need is to outsource most of your non-core operations or services to third parties.
Similarly, economic factors can also have an impact on the facility management budget. After all, global trade has far-reaching and conflicting consequences on prices. But tech disruption in industries, however, can be a pleasant surprise. It cuts out your overdependence on legacy systems and influences you to invest in new technologies.
Best Strategies to Reduce Facilities Management Spend
The good news is that there is more than one way facilities management can reduce costs:
Negotiate a Suitable Reduction
When comes to reducing the budget of facilities management, don’t hope for an instant solution. However, the right negotiation tactic at the right time can help your company reduce costs faster. But this strategy requires consistent engagement with the service provider.
In fact, you should be open about budgetary pressures to ensure transparency throughout the negotiations. You can also use a variety of incentives to make the negotiation process more tactical. Your goal should be to reduce fixed costs and extend contracts of supply partners.
There’s no room for generalisation when it comes to negotiation strategy. The success of this strategy boils down to the maturity of your facility management operations. Oftentimes, it just takes a single phone call to negotiate a 10% of reduction in the cleaning contract. In 2021, companies should negotiate cost reductions across all their facility management operations.
Reduce Your Total Number of Suppliers
Supply chain rationalization refers to reducing your number of service providers and suppliers. It may sound odd, but when it comes to facilities management, a single supplier can be more than enough. Remember, rationalization of the supply chain doesn’t mean you should let go of your supply chain network. Instead, focus on the most valued services for your company to increase build resilience.
The fact of the matter is that the more suppliers you reduce the more revenue stream and discount offers you can avail. But if you already have a few suppliers, manage the performance, meetings, and responsibilities to figure out more ways to reduce costs.
Improve Your Invoicing Model
Although this strategy may come across as a bit drastic, you can redefine your invoicing model. Your objective should be to make the service contract agreement more practical and suitable to your needs. If your contract provider is charging on an ad-hoc basis, you can roll out limits on the coverage.
This cost reduction strategy allows you to move your invoices from a monthly to quarterly basis. It would have a direct effect and bring down a good chunk of invoice volume. Of course, each contract provider has its own billing requirements. Still, seek out quarterly invoicing to save as many potential costs as you can in the long run.
Although market perception around rebates is not positive, you can effectively implement the “right” rebates to avoid recurring and extraneous costs. Rebate contract agreements make more sense when you have a high sales volume.
You can implement a rebate agreement with your facility management provider and then incentivize at a different level. But you will need to determine key areas of the rebate agreement to increase the revenue scope of your organisation.
Be Cautious and Adaptable at the Same Time
You should be cautious no matter what strategies you plan to implement and reduce your facility management spending. From negotiation to renewed invoice model, each strategy requires a custom approach tailored to “your” organizational needs.
For instance, you can’t impose one after another rebate on suppliers that would reduce the quality of their service. Instead, opt for each approach to avoid inflatable variable costs. Ideally, you should maintain strategic negotiations to ensure good relationships.
In fact, seek out the services of a trained and experienced negotiator to initiate and finalize cost reduction negotiations. The trick is to cut back on costs through negotiations without creating any tension. Today, companies have to be at the forefront to recognize significant cost reductions through impeccable facilities management.
So, if you want to cut back on a lot of potential costs, invest in the advanced tools that can support your facility management team. Of course, a dramatic shift will incur more costs but the name of the game is to spot unpredictable elements that can lead to potential rewards.
You can align your strategic decisions to clarify ideas and integrate internal communications. But in retrospect, the key is to opt for modern-day facilities solutions and technologies that can make a positive impact on business processes, employees’ performance, data support, and equipment maintenance.