Managing business expenses can be enough to make you light-headed. Long- and short-term decisions, priorities, vendors, contract terms, limited resources — the effects can be paralyzing. The good news is many businesses today are adopting an established methodology loosely based on medical triage to make sense of it all.
By definition, “business triage” is the sorting and allocation of resources according to a system of priorities designed to maximize your investment. See also: “get more bang for your buck.”
“It’s a great tool that can breathe life into your bottom line and effectively reduce your spend,” says Roger Zona, president and founder of TPI Efficiency.
Smart Business spoke to Zona about utilizing limited resources for the greatest good, discovering additional improvements for long-term financial health and how business triage might just be the answer to what ails you.
Where should companies begin?
When we look at a business’s entire book of operating expenses, often the largest recurring operating expenses include employees, insurance and facility costs. All of these costs need to be considered for the long-term health of the company and this is where companies can begin to measure against the triage method. Triage determines which items should be addressed first to have the largest, long-term payoff.
Picture three tiers of a pyramid. As companies make their way up the pyramid, costs typically increase as well as length of financial recovery or ROI.
At the top, is tier 3, ‘long-term care,’ which includes the most expensive purchases such as employees, inventory, mortgage or rent, insurance and taxes.
The second tier is ‘specialized care.’ This includes services that may require specialized equipment and expertise like telecommunication services, building envelope, HVAC, credit card processing and technology.
Tier 1, at the bottom of our pyramid, is ‘urgent care,’ which is usually the best place to start. First, you’ll want to ‘stabilize’ business expenses by investigating potential tax recovery and reviewing obvious ‘pain points’ felt by your financial team. Often, the greatest impact at this stage is through turnkey solutions, such as utility contracts.
What typically is the best course of treatment?
Similar to an emergency room patient, you’ll need to first stabilize your expenses and establish good ‘baseline vitals.’ Analyze ‘patient history’ by reviewing contracts, risk tolerance, exit penalties, term and auto-renewals with an expert. Based on the best technology and analysis available, you can recommend the course of treatment.
Perhaps you need a ‘prescription’ change, finding a new vendor that offers greater assistance to reach your financial goals. At this stage, you may be ready to ‘schedule extended treatments,’ opting for technology enhancements, ‘transplants,’ or more extensive testing and diagnosis to determine the viability of second-tier strategies such as HVAC, building envelope or LED lighting enhancements in the longer term. You will want to be referred to a specialist to assist with these efforts. And, as always, you’ll want to schedule regular ‘check-ups’ to assure your financial strategy is on track.
Who should be involved in examining operating expenses?
The procurement market can be confusing to the casual observer and capital projects may be difficult to deploy, but there is no need to face your efficiency goals without some assistance. Experienced consultants who know what they’re looking for will bring your attention to caveats, offer assistance during the discovery period, make recommendations for service providers and specialists, and assure that long-term care is provided to keep your operational expenses as efficient as possible.
A triage approach to operational efficiency transforms the expense management experience, helping you quickly identify and fix immediate symptoms and locate appropriate care for long-term financial success.
Insights Energy Solutions is brought to you by TPI Efficiency