Lucy - BQ Magazine EditorThere’s something frustrating about seeing decent sales figures and still wondering where the profit went. The orders are there. The team is busy. Everything looks fine, but margins keep shrinking, so it’s worth checking operating costs before chasing more sales.
Not the big, obvious expenses. It’s the other stuff. Cleaning contracts, maintenance bills, electricity, waste collection. Monthly payments go unnoticed until price increases and extra charges start adding up. Nobody notices straight away. That’s part of the problem.
The Contracts That Nobody Has Looked at in Ages
There’s probably a cleaning contract somewhere in the business that’s been running for years. Same supplier, same arrangement, invoices paid on time. Nothing wrong with that, necessarily. But maybe the warehouse now operates fewer hours. Perhaps a factory has replaced some equipment, or one of the sites isn’t being used as much as it used to be. The contract hasn’t changed, though. That’s where a quick check can help.
Pull the invoices from the last 12 months. Compare them with the original agreement, look at the renewal increases and check whether any extra charges have appeared. If a supplier has increased its rates, ask what’s changed. Sometimes the increase is justified. Sometimes there’s room to negotiate. Either way, paying the invoice without asking questions doesn’t tell anyone whether the cost still makes sense.
That Electricity Bill Is Getting Expensive
Energy is usually one of the first things people look at when overheads start climbing. Especially in warehouses and factories, where equipment can run for hours at a time. But there’s a difference between paying more for electricity and actually using more of it.
Check the consumption figures in kilowatt-hours alongside the amount charged. If usage hasn’t changed much, the tariff could be responsible. If consumption has jumped, look at operating hours, heating, lighting and machinery.
A warehouse might have lights running overnight in areas nobody uses. Equipment could be left running during long breaks. It’s easy to overlook these things during a busy shift, but adjusting lighting and equipment schedules can help cut unnecessary usage. The Carbon Trust’s business energy-saving guidance covers some practical ways to identify unnecessary energy use. No need to start replacing equipment just because the bill has gone up. Find out what’s driving the increase first
And What Are Those Suppliers Charging Now?
Long-standing supplier relationships can be useful. There’s less back-and-forth, the contractor knows the site, and things generally get done. Still, a contract that’s been renewed automatically for three years deserves a look. Check the annual increases, minimum charges and additional fees. Maintenance agreements are particularly worth checking because emergency callouts and replacement parts can add up quickly.
If the business operates several locations, compare what each site pays for similar services. One location might be paying more than another for no obvious reason. Or there might be a good reason. Different requirements, different service levels, different contract terms. The point is to check.
Sometimes combining contracts across locations makes sense. Sometimes it doesn’t. What matters is comparing the actual cost against what’s being provided, rather than assuming the existing arrangement is still the best option.
Waste Collection Is Easy to Forget About
Waste collection doesn’t usually get much attention unless something goes wrong. The bins are emptied, the site carries on working, and the invoice gets paid. Month after month. But has the amount of waste changed? Are collections happening more often than necessary? If bins are overflowing or collections seem too frequent, the current schedule may need a rethink. It’s worth checking that your waste management Peterborough collections still fit your business, especially if your volumes have changed. The collection frequency and container requirements should reflect what the site actually produces.
There’s another thing to consider here: why is the business throwing so much away? Damaged stock, excess packaging and over-ordering can all increase disposal costs. If those problems start in purchasing or stock control, changing the collection contract won’t fix them.
Maintenance Is Where Cheap Decisions Can Get Expensive
When budgets get tight, maintenance spending often comes under pressure. The problem is that putting off a repair doesn’t necessarily make the cost disappear. Sometimes it just makes the eventual bill bigger. Say a forklift has broken down three times in six months. Each repair gets approved because replacing the machine seems expensive. Has anyone added up those repair invoices? Include the downtime and disruption, then compare the total with the replacement cost. The machine might still be worth keeping, but at least there’s something concrete behind the decision. If the same equipment keeps breaking down, another repair might not be worth it. Skipping routine servicing can also end up costing more when something fails during production.
Cutting Every Budget by 10% Won’t Necessarily Help
A blanket cost-cutting target looks simple enough. Every department reduces spending, and the numbers come down. Except that’s not always what happens. A warehouse running around the clock has different requirements from an office open five days a week. A factory producing more units will naturally have different maintenance and energy costs from one running below capacity. So compare costs against actual activity.
A manufacturer could track maintenance spending per unit produced. A business with several premises could compare energy costs per square metre and investigate the locations that look unusually expensive. These figures won’t explain everything, but they give management somewhere useful to start.
It’s also worth checking how overheads are allocated when calculating product margins. If facility costs haven’t been updated to reflect how the business operates now, some products might look more profitable than they really are. That’s not a cost-cutting problem. It’s a costing problem, and it needs a different fix.
A Quick Review Is Better Than Another Big Project
Review recent invoices, compare costs with last quarter, question unexpected increases, and make sure agreed savings appear on the next bill. Otherwise, it’s easy to assume a saving has happened when it hasn’t.
Some expenses will be perfectly reasonable. Others might need renegotiating. A few may simply be leftover arrangements that nobody has questioned for years. And that’s really the point.
Facility overheads don’t need to be slashed across the board. But they do need a proper look now and then, particularly when margins are getting tighter, and the business can’t quite explain why.