We’ve said it before and we’ll say it again: we know that your uniform rental program is not your highest priority. That’s exactly why we’re here. We get it. We also know that the service design of the industry relies on this being the case. Your uniform rental invoices are confusing, volatile and difficult to manage due to hard to detect changes. More importantly, when changes do occur, it’s difficult to determine the true impact. Especially the long-term impact. When you get an invoice and all looks good, can you be so sure it’s oll korrect?
This post focuses on understanding the impact of cost neutral changes to your invoice. This occurs whenever an item or items get added or removed from service, and some other part of the invoice is tweaked in order to keep cost the same. For example, if you get a price increase on your shop towels, your driver might be able to square things with you by reducing the inventory a bit. While it sometimes can work in your favor in the short term, the adjustment can have a long-term effect that likely doesn’t benefit you.
COST NEUTRAL CHANGES CAN HAVE NEGATIVE LONG-TERM EFFECTS
Let’s look at a scenario that many customers are subject to, but often don’t notice. Whenever an employee stops using garments, that cost reduction can be mitigated by your provider increasing other parts of the invoice. Sometimes it’s just an adjustment to a single line. It may appear minor because the increase can be masked by the damage or loss charges due to the above mentioned reduction in garment inventory. The increase could also be spread among three or four lines that aren’t related. Like a slight bump in the maintenance rate. Maybe even just a penny, but on a maintenance line that penny could be a 25% increase. Did you just starting ruining 25% more garments? You won’t notice right away. See how it works?
When garment or non-garment inventories change, the volatility often masks the rate changes that might be occurring. Do you have the time to go x-ray every invoice? Don’t you think your provider knows that? Managing cost at the aggregate level does not optimize your cost cutting. If you’re trying to control cost by managing to significant deviations, then the small ones will likely fly under the radar. When those small changes keep sticking, your ability to mitigate increases diminishes.
RATE AND INVENTORY INCREASES CAN HIDE IN PLAIN SIGHT
Rate increases that stick – because the invoice was paid and the change was “too small” to notice – become especially problematic because of their compounding nature. You end up getting future increases that are beyond what you had agreed to. Due to changing inventories, adding/removing employees, maintenance line changes and a myriad of other invoice shifts, calculating compliance of price increases is extremely difficult. The service design of your invoice and your services in general helps mask the actual rate of increase.
The best way to avoid unnecessary cost is to catch the changes when they happen, at the line level. It’s not just about contract compliance. It’s also about ensuring that you’re being invoiced for services and products that match your business requirements. Preventing non-compliant and unnecessary changes in real time is difficult, but it is possible. Trying to chase credits months after the fact is an exercise in futility.
IT’S LIKE BOILING A FROG
An invoice that appears to mostly stay the same could actually hide cost cutting opportunities. Things may look okay at an aggregate level, but the concealing effect of a cost neutral adjustment simply means you could be overpaying without knowing you’re overpaying. It doesn’t have to be that way.