Late summer and autumn are peak season for budget negotiations in Danish companies. Although difficult decisions and priorities are made; many companies fail to address significant cost items where even medium-sized companies can often optimise millions of pounds annually.
Foreign competitors are pushing hard and there is a focus on competitiveness; yet some cost groups go under the radar (e.g. financial services) or are given an overall savings target without a concrete action plan (e.g. production aids).
Danish companies are reluctant to negotiate with their banks
Just as many individuals rarely change banks or even research the market; the same is true for companies.
"Since the crisis; banks have increased their power. Through increased requirements for borrowers; including cash flow; many companies have been given new and less favourable terms on their bank commitments. Most companies are unaware of the opportunities to take control of this themselves; either domestically or internationally. At the same time; there has been no tradition of using external consultants to provide this knowledge;" says Hans-Henrik Hansen; Country Manager at ERA Group.
However; renegotiating the company's financial commitments can be the start of a positive spiral towards improved cash flow and competitiveness. "Danish companies rarely proactively negotiate terms with their banks. Few people in companies have the right banking background; and there may be a fear that one's borrowing options and terms will deteriorate if one tries to negotiate. That is precisely why the potential is so great;" says Hans-Henrik Hansen.
Many companies have potential savings of over DKK 1 million by negotiating interest rates; loan terms; credit card fees and collateral.
Over 20% savings on production aids
"A factory knows its raw materials; but often lacks an overall view of its costs for production aids and their prices; even though it operates in a competitive industry. If you look at items that are used directly in production; there is a lot to be saved without compromising on quality. Savings of 20-30% are not at all unusual;" says Hans-Henrik Hansen.
Many Danish companies make ad hoc purchases in a number of areas for production. A good tip is to make fixed agreements to keep prices down and work with a few suppliers. "All too often; companies let individual employees decide where to order ball bearings; for example;" says Hans-Henrik Skonning Hansen.
External help can strengthen competitiveness
Budget planning should be an open process; where analyzes and benchmarks are obtained in a structured manner. With both domestic and international competitors; it can be difficult to obtain sufficient information on your own; especially on the costs that do not receive the most attention in companies.
With external help; companies can obtain sufficient information to support their budget targets and ensure that this is done in a focused manner and with expert knowledge from the supplier industries.
