THE NEWSMAGAZINE FOR RETAIL EXECUTIVES

A LEBHAR-FRIEDMAN PUBLICATION

Leave Utility Audits to Experts                           

By Mary Ann Milsop

Utility bills are complex documents that most people don't understand. With deregulation, utility bills have become even more difficult to understand. Developing a system to effectively audit utility bills would require massive implementation costs and the allocation of valuable IT resources for what is essentially a non-core business function. Moreover, once the system is implemented, a company would have to hire scores of resources to enter and analyze the data in order to control this ongoing expense.

Auditing utility bills is not just about making sure your utility companies and your landlords are paid on time. It's about being able to gain an understanding of your utility costs and to use this understanding to improve your bottom line. With utility costs rising, controlling energy costs has become a No. 1 priority to many companies.

Utility bills, particularly landlord utility bills, are complex documents. Most lease administrators and accounts-payable departments do not have the time or the expertise to audit these documents.

Energy expenditures represent the third-largest expense in most companies, next to payroll. However, it is the one expenditure that is often overlooked as an opportunity to improve the bottom line.

With the right technology, utility-audit companies can effectively audit these transactions, while gathering all the pertinent data to drive down utility costs. Utility-bill payment companies can effectively audit and pay these bills, as well, but a great deal of control must be given up whenever a company makes a decision to give up its checkbook. This is particularly important when the same company audits the bills it is paying.

As a non-core business function, should this process be outsourced? If so, what are the benefits of outsourcing the utility-audit function and what is the criteria one should consider when selecting a utility- audit company?

In today's constantly changing energy market, meaningful energy information can make a big impact on energy spend. How companies manage, utilize and audit this information directly impacts the bottom line. When choosing a utility-audit company, you should pick a company that is totally independent and objective in order to maximize all the opportunities available to reduce energy costs. This includes utility-bill tracking, verification, validation, exception reporting, rate auditing, billing resolution (both landlord and utility company), and deregulation contract negotiations, identification of inefficient facilities and expert analysis of existing energy data.

In order to develop and manage relationships with landlords and utility companies, one must have an intimate knowledge of energy and how utility companies and landlords overcharge or make mistakes. This knowledge isn't quickly or easily acquired and is constantly changing. If a company doesn't have the internal resources and isn't outsourcing this function, chances are it is overlooking an opportunity to save up to 10% of its total utility costs.

A utility-auditing company audits millions of utility bills each year. Each time a utility-auditing company audits a utility bill, there are issues that are identified that can be applied to other clients. Over time, any new customer that enlists the services of the audit company will gain from the knowledge and expertise that was derived from past audits.

In general, companies that don't outsource their utility-audit function are incurring much higher costs. These costs are not simply absorbed by the company; they are passed on to the end customer, which translates into higher costs and less sales.

An experienced utility-audit company will have a track record that demonstrates whether or not it can live up to its promises. In other words, look beyond the hype and research the company. Find out how long it has been in business, how many customers it has and whether or not it audits both landlord and utility company bills.

Many companies are under pressure to outsource the audit of their utility bills. Turning over this audit function will not only cut costs, but also drastically improve the bottom line.