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By Sandy Chockla, Franchise Owner, Expense Reduction Analysts
Another critical step is to make sure your organization knows what contracts exist with your vendors and what terms are in those contracts. For each contract, ensure you understand if there is an expiration date or if it is evergreen. There may be a clause that specifies that you need to inform the vendor 30, 60, or 90 days before the expiration date if you do not want the contract to automatically renew. As mentioned earlier, other clauses may include volume or spend thresholds which make you eligible for a rebate or discount.
Another important clause for some products or services will define price adjustments, allowing the vendor to adjust the pricing (up or down) based on a specified price index. If you have a clause such as this, it is important to monitor the index and review the invoices to ensure any increases are correct. You also need to proactively monitor to ensure you receive price decreases as defined per the contract.
Sandy Chockla is a franchise owner and Principal Consultant for Expense Reduction Analysts (ERA). ERA has a network of experts in more than 40 overhead expense categories which I leverage to benchmark prices, review supplier agreements, and optimize our client’s purchases or services. This is done without compromising supplier quality or service. If you would like to have a discussion, you can contact Sandy at email@example.com or call direct at 970-232-4860