If I offered you a 20% reduction, would you jump at the deal?
You should be saying to yourself, “Wait! What?” There are a few questions you have to ask before you can proceed.
You have to know what item or spend category we’re talking about. Some industries operate with much thinner margins than others. If you’re negotiating with someone supplying food products, they’ll have a narrow band from which they can operate. However, if you’re trying to get a price on freight, that may be a whole different story.
If you get a discount in an area with large margins, you might end up leaving opportunity unrealized if you jump at the 20%. On the other hand, if you accept the 20% in an industry with small margins, you may be getting a phenomenal deal. More likely though, something is “fishy” and you will end up paying more.
You should also know what types of discounts you already have in place. Does the person offering the new deal know that you’re already paying a discounted price? Maybe, maybe not. But a supplier’s rep can sometimes do what we like to refer to as “funny math.” It sounds good, but it doesn’t hold up to any scrutiny.
Finally, what’s the cost. To get the reduction, will you have to agree to a lengthy, exclusive arrangement? Will service suffer in any way? Have you forfeited flexibility? You need to understand the total implications of any deal because most deals come with a cost.
Having negotiated hundreds of price and service related vendor agreements, Expense Consulting can help navigate through this sometimes tricky landscape.
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About Expense Consulting
Expense Consulting is a full-service accounts payable auditing and cost reduction consultancy, helping organizations significantly reduce operating expenses. Since 2009, we've helped hundreds of organizations recover millions of dollars of over-billings and have secured millions of dollars in future cost savings. To learn more about reducing your organization's expenses, contact us at 860.761.3500 or visit us at www.expenseconsulting.com