Business Overhead Costs Too High? Consider an Audit

In the never-ending quest to stay competitive, small businesses must keep their business overhead costs under control. One area often overlooked where many businesses could find cost savings is their utilities. An audit of utilities – including telecom invoicing, freight charges and property taxes – can potentially save a large percentage of current operational expenditures.

What is a Utility Bill Audit?

Business Overhead Costs

An auditor searches for billing errors by assessing a company’s utility invoices. The auditor will also evaluate current rate packages in order to find further savings. While many businesses may choose to do an audit in-house, it is recommended that an outside contractor perform the assessment. Utility bills are complicated by hidden costs and complex billing codes. Commercial utility auditors are contractors who specialize in evaluating the utility outlays of a business; in-house audits tend to be performed by personnel whose expertise often lies in other areas. Contractors will usually find more billing errors than the company employee who, in addition to his current duties, likely had the task of “finding cost savings” imposed upon him by superiors. Moreover, contractors have current market knowledge of the various plans utility providers offer their customers – hence they can strike a better deal than those unschooled in a utility’s tariffs. A contractor’s experience also helps to document issues that can be more quickly processed by a utility.

What is Audited?

A utility auditor looks for incorrect meter readings, redundant billing charges, line charge evaluations and billing or accounting errors. They also check to see if current surcharges, taxes and tariffs are correctly applied. With this information in hand, they look for refunds from the utility audited. Should billing errors be discovered, most states provide up to three years for a refund and some states allow four. An auditor will also determine stranded assets and improve budget efficacy.

Why Should You Audit?

International Data Corporation (IDC), a leading advisory group to the IT industry, estimates that telecom and network services rank as the third or fourth largest operating expense for most businesses. In fact, most managers are unaware of their company’s total annual expenditures for telecom and utilities. Gartner, Inc. (NYSE:IT) claims that network billing irregularities cost the typical business 10% or more in costs. Many auditors find that 70% of their clients have some level of billing errors and overcharges.

Beware of the Auditing Retainer

The goal is to fully maximize cost savings from an audit. Therefore, steer clear of auditors who charge a retainer with a contingent percentage. If they charge a low percentage, odds are that they receive compensation from the utility provider referred to you. Insure that your auditor is independent and that your business’s rate packages are direct from the provider.

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