As the recession continues to deepen, retailers of all stripes are choosing to shut down unprofitable locations in bids to cut costs. But there is one mundane area that companies may be overlooking amid all the rigors of rejecting leases, cutting back on staffing and dealing with excess merchandise—utilities. And that oversight, as small as it sounds, could be costing companies tens of thousands in savings at each location, according to Scott Simmons, vice president of service delivery with Advantage IQ, a Spokane, Wash.-based expense management firm.
The costly mistakes are easy to make. For one, Simmons says, many retailers don't think to call providers ahead of time to schedule a service shut-off. Often, that's left to the last minute—when staff is in its last day of occupancy. But utilities companies usually have a waiting list of up to five days for service cancellations and they will continue to charge retailers even if the sites have already been vacated. Another common mistake is failing to review bills. Once a chain leaves a particular location, it should make sure it’s not being charged for extra days of service.
Advantage IQ has seen more than one instance where the accounting department simply continued paying the charges after new tenants moved in, Simmons says. In one case, the company ended up paying up to $20,000 for services it didn’t use. If that happens, the utilities companies won’t remedy the situation, leaving it up to the tenants themselves to work out theirobligations.
“You now have to hope that they’ll be honest enough and pay back that money,” Simmons says. “And worse yet, [if the space is empty] you have no ability to recoup those fees from anyone.”
For some of these problems, there are simple solutions. Simmons recommends calling providers between five and 15 days in advance to schedule and appointment. What’s more, retailers should know what services they have been using and whether they come bundled together, with one common bill. In small municipalities, the same company may provide electricity, gas and water, making the transaction more straightforward. In big cities like New York or San Francisco, different companies are responsible for different utilities and there well might be one water or electricity meter for the main property and another for the parking lot. The technicians who will come to shut off those services won’t remember the particulars of every account and might need the client’s help in figuring out what needs to be done, Simmons says.
Once a shut-off date has been scheduled, the retailer should also make sure at least one employee is present on the property to help access meters and other equipment. If a technician shows up and nobody is there, he may leave without cancelling the service.
However, in some cases a retailer might be out of luck. Sometimes, (and this has been happening more frequently in the current market climate), a retailer will have to leave a store before its lease runs out. In that case, it might be under obligation to continue paying for certain utilities, such as gas, until the end of its lease term. If a retail chain finds itself in such a situation, it should make sure to cancel its utilities contract at the appointed date.
A successful, cost-effective handling of utilities often comes down to communication—between the various departments at the retailer’s own company, between the retailer and its landlord and between the retailer and its utilities provider, Simmons notes. But for those companies too busy or inexperienced towith utilities contracts, there is also an option of hiring an expense management firm like Advantage IQ. For a flat fee of $150, the company will handle the closing of all utilities accounts and services on your site. And once the economy gets better, Advantage IQ also has the capability to help retailers with ordering utilities services for new locations for approximately $265 per site.