Controlling Supply Costs in Your Cleaning Company

What comes to mind when you think about the costs of doing business? For most cleaning company owners it would start with employee wages, insurance, the electric bill, utilities, gas….and so on. But do you give any thought to how much your supply costs are running you? That particular cost is usually at the bottom of most business owners list.

Although supply costs are likely to only be a small part of a cleaning company's expenses, it will have an influence on the bottom line and is an expense that needs to be monitored regularly. We purchased the majority of our cleaning supplies from a janitorial distributor. We were always surprised by the price increases that would sometimes take affect from one order to the next.

Are You Controlling Your Supply Costs?

Controlling Supply Costs

There are a number of reasons why supply costs can surge upwards. For example, we saw the price of our trash can liners jump up and down (mostly up) because the main raw material in the production of trash can liners is petroleum, which as we all know, can be quite volatile from day to day. Paper prices can also increase with short notice as the cost of paper rises with the volatility of the paper industry and controversy over mining of trees. We had overall increases some years that amounted to over 8% and some product lines that rose as high as 20%. Sure, this didn't amount to a whole lot in the short term, but when you start adding it all up over an entire year, it definitely affected our bottom line.

For example, let's say you always considered 3% a good percentage for your supply costs when figuring expenses for your quote. If that was last year's number, perhaps today you should be closer to 5% or 6%. If you haven't been monitoring your supply costs, you may be selling yourself short. Keeping these costs down are important to remain competitive and profitable. By keeping an eye on and controlling supply costs, you can keep those costs in check and have a better picture into what your supplies are costing your company today. 

Following are tips to keep your costs down: 

1. Always buy high quality brand name products that work well for you. If a new product comes out, ask your distributor for a sample that you can try out. Low priced chemicals and supplies aren't necessarily the best choice. If you have to use more of a "cheaper" product, than you are not saving money. 
2. Beware of all supply costs. If the product is being delivered, make sure you know what the shipping charges are and include that figuring into the total cost of the product. If you need to pick up the product at a local distributor, figure in your time (or your employee's time) and the mileage needed to pick up that product. It's these little costs that can cost us big money in the long run.
3. If possible, place one large order with your vendor or janitorial distributor instead of several smaller orders. This will help keep your shipping costs down and you may also be able to take advantage of volume discounting.
4. Buying larger sizes and products or chemicals that you mix yourself is more economical than buying products in small sizes. You may think that RTU (ready to use) products save on production time because there is no mixing and are convenient for your cleaners to use, but the reality is they are more expensive. The extra water added to the product increases the weight, which causes shipping costs to soar.
5. When mixing chemicals, make sure that your cleaning technicians read and follow all label directions. Adding too much water will make a chemical less effective; adding too little is a waste of product (and money) and may cause damage to the surface, floor or fixture that is being cleaned. Accuracy is key to keeping costs down.
6. Think before you buy. New products are coming out all the time. Do you really need to have five or six products, if one will do what all the other products promise? Find one cleaning product that can be used for multiple purposes; this eliminates congested brutes and saves you money.
7. Don't be afraid to raise prices for your customers. No one wants to raise prices but it is an inevitable part of doing business. For you to stay in business you need to make a profit, period. Sure, your cleaning business can absorb “some” price increases but there will come the time when you will need to pass them on.
8. Keep supply inventory at a reasonable level. Having too much or too little inventory on hand will cost you money. If you run short, you are going to make a hasty purchase that may end up costing you additional shipping charges. On the other hand, if you have too much inventory on hand, this means you have less cash on hand for other things. Forecasting what supplies you need; will keep your inventory to a minimum and your cash on the plus side.
9. Track and monitor all your supply costs annually, including freight bills and carrier costs. This strategy allows you to understand your actual supply costs on a yearly basis and to make the necessary corrections when bidding and any necessary actions to control those costs.

Remember the old adage; “A Penny Saved Is a Penny Earned?” This holds true when it comes to controlling your bottom line and it begins with keeping a keen eye on your supply costs. Remember, you are in business to make a profit. Don't throw it away by neglecting those costs. Regardless of how big or small your cleaning business is; understanding, managing, and controlling your supply costs will improve your financial status and your ability to bid profitably.

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