Five Ways CFOs Can Avoid Overspending on Printers and CopiersHannah Recla
Like most business leaders today, public and private sector CFOs and finance administrators are expected to handle a significantly more diverse set of responsibilities than ever before. And you often feel the pain of conflicting objectives.
On one hand you must safeguard operating costs and ensure that the organization does not overspend, while at the same time working to provide the kinds of services, resources and systems that everyone needs.
One important area that is often overlooked is your printer and copier program. According to our research most organizations significantly overspend on their copier/printer program by an average of 32%. Depending on the size of the organization, that easily equates to a six to seven-figure savings opportunity. Indeed, we’ve worked closely with CFOs and business leaders in over 150 organizations throughout the United States and 98% of them has found significant savings.
To learn more about our K-12 Education findings, read Ethan Davis’ blog post here that breaks down some our current research.
Reasons for Over Spending
There are three factors that contribute to overspending on printers and copiers. Overpaying, overbuying and cost creep. Organizations often overpay for the services and equipment they receive due primarily to a lack of truly competitive RFPs. They often over-buy as well; engaging in hardware and systems that are over-kill for the application or by overlooking changes in the environment that influence the level of service needed. And cost creep – unexpected costs over the course of the contract term – often silently get out of hand, especially when districts simply re-up their lease agreements every 3-5 years.
Real World Example
I have seen these factors at many times. Back in 2014, a large K-12 school district in California was going through the contracting process for copy/print environment. They knew purchasing was the most cost-effective way to procure equipment, but their fleet was large and they just didn’t have the budget. That left them with the need to lease. The CFO knew that in typical bids, lease rates were difficult to analyze and compare. So he decided to take our advice and change the way they asked for pricing from vendors. When they wrote the RFP, they asked for equipment and service pricing separately, asked for both purchase and lease pricing, and requested both 36- and 60-month month pricing for all the hardware and options. When the bids came back from the vendors, the CFO was able to calculate the APR of the vendors’ proposed financing, and determined that if the district used their own financing sources, they could save a lot of money. With access to the right data and a little bit of creativity, he reduced their spending by an additional 7% over what the vendor had proposed.
Five Ways to Save
It is now more important than ever before to consider ways to optimize your organization’s printer/copier program. The implications overspending reach far beyond the balance sheet. What are some best practices to consider? Here are five ways that CFOs can save.
#1 – Purchase if possible – Purchasing rather than leasing is almost always a better choice. And plan on keeping the hardware for at least five years or more. We find that this is typically the most cost-effective approach for most organizations.
#2 – Use a 60 month capital lease – If you must lease, we advise our clients to use a 60 month capital lease, or a dollar buyout lease, as opposed to 60 month operating lease. We discourage 36 month lease terms because we find organizations end up paying about 24% to 30% more.
#3 – Evaluate purchase and lease pricing – Vendors make money from the financing of equipment, so it is important to know their purchase price as well as to understand the lease rate factor in order to accurately calculate Annual Percentage Rate.
#4 – Keep equipment and service pricing separate – Imagine that a location or school gets closed down, or a department is relocated. If you have the maintenance bundled with the lease you end up paying on that maintenance regardless of whether or not you’re using the equipment. For this reason, we recommend separating the equipment and service pricing.
#5 – Device returns at end of lease – It is important to understand whose responsibility it is for the cost of device returns since returns can cost $500-$800 per machine, depending on the size of the machine and how far it needs to go. Re-up with your current vendor and that cost may be buried in the lease. Go with a competitor, and you may need to pay unexpectedly out-of-pocket.
Want to move forward to ensure your organization does not overspend on printers and copiers? We can help. Optimizon is a professional business consultancy that specializes in public and private sector organizations as well as the intricacies of a organization-wide printer/copier environments. We know the machines, the measurements, and most of all…the game. Indeed, we’ve seen just about every kind of vendor proposal in the books. The difference is that we don’t sell anything. Instead, we work for you to ensure that you get the right pricing, the right capabilities and the right programs in place to optimize your environment and enable continued savings organization-wide. We’ve worked with many organizations over the past 25 years, and we’d be pleased to explore how we can help you too.
Find out more at Optimizon.com. And just click here to schedule a free consultation.