Office Supply Contract Compliance Reviews Can Save You Money and Headaches
Congratulations. You have successfully negotiated and executed an office supplies contract. You have established contract pricing for the most commonly purchased items, set up your office to order online, and negotiated favorable terms and conditions. Now all you have to do is sit back and relax. Wrong!
What most people don’t realize is that office supply vendors often structure your contract with a number of hidden items that, if not monitored for compliance, can lead to higher costs, lost incentives/rebates and/or penalties. Consistent monitoring helps you to maximize savings, minimize those penalties, and control your supply budget.
A typical office supply contract with a committed spend over the life of the contract usually contains:
- Contract pricing
- Non-contract discounts
- Incentives/rebates and/or penalties for volume spend, average order size, etc.
In addition to the monthly invoices, your office supply vendor should be providing you with monthly or quarterly usage reports, detailed by office/location:
- Unit of measure
- Price per unit and total
- Year-to-date quantity shipped
- Year-to-date average price
- Year-to-date frequency
Usage reports are a useful tool to monitor the buying habits of each location, and keep you on track for meeting your contract spend, rebates, and incentives.
Important items to monitor during your contract terms are:
- Spend to Date – This allows you to make adjustments to buying habits to avoid coming up short at the end of the term.
- Contract vs. Non-contract Spend by Office – This identifies end-users who are not meeting the targeted percentage of contract spend, which will yield the most savings.
- Spend Tracker – This helps you to meet the required terms or spend (average order size, percentage of orders placed on line, etc) to maximize additional savings.
- Spend by Attorney by office – This monitors the total spend per office by the number of attorneys in that office. This can be a very helpful tool in budgeting office supply spend for each location.
If you want to avoid headaches and save money, just an annual or semi-annual compliance review will assure you are meeting the terms and conditions of your contract and position you for an easy renewal of your office supply contract.
We’re pleased to deliver these concrete insights; if you have specific questions about your firm’s office supplies contract, however, don’t hesitate to contact Lisa Schneider at email@example.com and prevail upon our expertise.
How are firms handling the decision to outsource business processes and the back office?
Mattern & Associates is proud to be a sponsor of the second annual PwC Law Firm Services Global Forum to be held in New York City this June 4th through 5th at the PwC building on Madison and 42nd Street. This year, the event will bring together law firm executives and partners from across the US and the globe to share points-of-view and provide strategic approaches to the business of law.
Amongst the many deep dives into important trends that will be held, I will be presenting on Tuesday, June 4th at 11am on this topic: “How to Strategize the Cost Effectiveness of Your Firm’s Business Processes and Back Office Outsourcing Decisions and Maximize Cost Recovery.”
In my session, I will discuss the pros and cons of business process/back office outsourcing, incorporate cost recovery strategies based upon the results of the Mattern & Associates 2012 Cost Recovery Survey, and will drill down on these questions:
- How are firms handling the decision to outsource business processes and the back office?
- What best practices are brought to bear?
- What is the proper and optimal structure to insure the recovery of the associated costs?
- What are the realistic savings?
Subscribers to our email updates through the Mattern Minute were invited to receive one of limited complimentary registrations to the event. Congratulations to our law firm colleagues at Dentons and Locke Lord LLP who were our recipients of this offer and will be attending the PwC event.
To learn more about the PwC Law Firm Services event, click here. If you do not receive our Mattern Minute email updates and would like to sign up, please contact Lisa Schneider at firstname.lastname@example.org.
Hope to see you next week in New York.
When it comes to your firm’s contracts: begin with the end in mind
Are you willing to hand over an additional $50,000 to terminate your vendor contract early? How about $150,000 to retain key office services personnel during a vendor change? Your answer to these questions are, undoubtedly, “no.” However, it is possible you may have already agreed to similar terms in your existing Labor, Services or Equipment contracts.
It is no secret; most contracts contain clauses and loopholes which favor one party over the other and that some of these loopholes have financial penalties attached to them which can range from triple the monthly bill, to a factor of a person’s salary, to a flat dollar amount.
Some of the more common types of these penalties Mattern has encountered are:
- Equipment Buyouts. Just like buying your leased car. If you decide to return your existing equipment, you may be responsible for remaining lease payments or the fair market value of a device.
- Equipment Removal Fees. If after termination of the equipment agreement you decide to return the devices, additional costs may be added to remove equipment from your premises.
- Early Cancelation/Termination. If the firm elects to cancel a labor or service contract prior to full term and without cause, this penalty can be a multiple of the base contract amount.
- Termination of Client Personnel. As the result of terminating a labor agreement, the vendor may not be responsible to keep those individual in their employ, but the client may be responsible to bear the severance costs of these employees until they are reassigned.
- Non-solicitation Fees. If you decided to change vendors and wished to retain any of the existing staff, the vendor may assess a penalty. Note: They may also assess this penalty if a third party hires the existing staff, with or without your knowledge/approval.
Although many of these penalties are only applicable if you terminate your agreement early, there are still some which can be imposed even at the end of an agreement which has gone to full-term. Where these really hurt you is when your firm is attempting to streamline services under one vendor or simply make a vendor change due to performance.
At Mattern, we are all in favor of vendor’s protecting themselves, but many of these penalties are just handcuffs to keep your firm from making cost-effective changes to your operation.
What do you do? First off, begin with the end in mind and think about what happens if you have to cancel a contract prematurely. Decide from the beginning on what controls you want over the situation and structure the contract appropriately. By creating a competitive situation your firm can minimize the impact of these penalties. The problem is the vendors all want the same protection so many of them are pitching the same penalties this is where market knowledge comes in to play.
If you feel you have an issue with the penalties in your contracts, contact the experts at Mattern who can develop a strategy to eliminate or reduce your firm’s exposure.
Welcome Joe Trdinich and Betty McAlvany to the Mattern & Associates Executive Team
Sometimes it’s nice to take a moment to observe a job well-done and also, in this case, to roll out a little proverbial red carpet.
Which in this case means we are pleased to say that, as a result of year over year double digit growth in revenues, we at Mattern & Associates are in the fortuitous position of bringing on two industry veterans to significantly strengthen Mattern’s Executive Team: please welcome Joe Trdinich and Betty McAlvany.
Joe joins Mattern with over twenty-five years of industry expertise, including nearly 15 years of executive leadership at Pitney Bowes in both the Management Services and Legal Solutions divisions and where he led operations for over 150 clients in 275 locations nationally and managed annual contract revenues exceeding $250M. He will be taking on responsibilities in operations.
Betty, a Six Sigma Black Belt, was a Solutions Principal in Records and Information Management (RIM) and the lead for RIM solutions, development and delivery at Pitney Bowes Management Services where she implemented customer satisfaction programs yielding an impressive 96% client satisfaction rate and 97% client retention rate.
We’re pleased to always move Mattern & Associates in the direction of excellence, and bringing Joe and Betty onto the Mattern Team will continue to serve that company goal.
We look forward to both the industry expertise that each of them will bring to Mattern &Associates, and also to working with them as highly respected colleagues.
Welcome to the Team.
Q: Who Is Minding the Store? (A: You)
I am sure many of you saw the article about the Fried Frank employee charged with stealing $376,000 worth of copy machine toner. This is not the first time we have run up against this type of behavior; it’s office theft, a surprisingly common practice. In the past, our team has encountered situations where employees were selling copy machine paper out on the street.
How does this type of large scale office theft happen, though? Surprisingly easily—given the opportunity and if no one is minding the store—which was obviously the case (no pun intended) here.
There are many misconceptions about office theft that lead to a lackadaisical reaction including the misunderstanding that the cost burden of theft is on the copier company since the supplies are normally covered under the service contract. This is incorrect; in the long run, your firm will be the one paying for this theft through higher supplies and maintenance pricing. Also many service contracts have language that allows them to increase pricing if your yields are not in line with normal usage/coverage—which, of course, occurs in the instances of large scale theft.
So, how and where can firms apply the tourniquet to stop this kind of theft?
The solution is straightforward if you have the controls in place or, more to the point, if the vendors who support you do.
If your service contract includes supplies:
- Have your vendors provide your firm periodic reconciliations on supplies shipped versus volumes ran on their equipment.
- Require them to ask for a meter read when supplies are ordered.
- Some companies implement automatic shipping based on projected volumes. This is can be troublesome at times but is another option.
If your service does not include supplies:
- The reconciliation is on you. Perform a semi-annual reconciliation tying in your volumes to toners used based on average yield.
- Better yet, tie the volume and yield into your cost recovery system’s reported volume and get a picture of your whole process.
$376,000 is a lot of toner—but you can leverage your contracts and cost recovery protocols to gain visibility and control over your firm’s office supplies, and take away opportunities for large scale theft your firm will eventually foot the bill for.