ACHRNEWS

Michigan Contractors Discuss Cutting Expenses

August 11, 2008

MT. PLEASANT, Mich. - Watching expenses is a common practice of which every business owner should engage. That’s a given. The most profitable HVACR contractors are those who monitor their expenses and cut costs whenever possible. Never has that been more evident than in an economically challenged state like Michigan. The loss of jobs and plant closings have had a greater impact on the Great Lake State than any other state in the country in the last few years. That makes it imperative that business owners trim expenses to meet shrinking revenue flows.

The NEWS recently sat down with three Michigan contractors - all members of the Michigan Chapter of the Air Conditioning Contractors of America (MIACCA) - during the group’s annual golf outing to discuss cost-cutting measures.

The contractors included MIACCA President Gary Shelly, owner of A to Z Total Heating & Cooling, Dearborn Heights; MIACCA Director Mickey McEvoy, owner of Liberty Total Comfort Systems, Redford; and MIACCA Vice President of Government Relations Dave Boelcke, owner of Boelcke Heating & Cooling, Stevensville.

Shelly said watching his costs has become a full-time job for him, adding that, “90 percent of my time over the past two years has been spent trying to figure out how to save a buck. Sometimes I pull the checkbook out just to see where the money is going. I have found some little things that I didn’t even know I was paying for.”

That seemed to be the overriding theme of the discussion; being able to track down and identify so-called “hidden costs” and how these costs were nickel-and-diming some of the money out of the checkbook.

“The old saying that if you watch your pennies your dollars will take care of themselves is really true,” said Boelcke. He added he shops around for the best deals in insurance and cell phones every couple of years in order to reduce his costs.

McEvoy said he has been taking a close look at the cost of parts and equipment that come from his suppliers. He said he has saved a lot of money by putting these costs under the microscope. “I have found that suppliers are shipping parts at different times and at higher prices that what was agreed to in the signed contracts,” he said. “Just because something was shipped later doesn’t mean we have to pay a higher cost and extra shipping costs.”

McEvoy said this problem is usually unintentional, but it is just the way some systems are set up. “Check the parts coming in to see what the supplier is selling you the parts for compared to what the list price of the products are that are already in the inventory system.”

All of the contractors agreed that business owners need to keep their eyes on accounts receivable and go after the customers that haven’t paid in 30 days. McEvoy said that some regularly take at least 45 days to pay, which hurts cash flow.

A DIFFERENT SET OF EYES

Shelly said he recently spent some time working the parts counter at his business, filling in for an employee. He said it was an eye-opening experience. “I saw a lot of things that I can do to cut our costs,” he said.

McEvoy recently made a decision that hasn’t been very popular in his employees’ eyes, but it has saved his company a lot of money. “I’m keeping all of the trucks in the shop,” he said. “The guys don’t like it but it was costing me about $1,000 a week to let them take the trucks home.”

He noted that he plans to buy more trailers that his trucks can haul to a jobsite and leave there, rather than having the expense of hauling the trailers back and forth. That way, he can purchase smaller, more fuel-efficient trucks, too.

Boelcke said he continues to let his people drive the trucks home but any maintenance or refueling has to be done off the clock. “They have to fill up their trucks on their own time, not on company time,” he said. “If they want to wash the truck, they have to do it on their own time, too.”

Boelcke said he has reduced his two-person installation crews to one because a lot of the work only requires one person. If a second person is needed to carry old equipment out or put new equipment in, he will ask others in the area to help out, often using service techs to do this work.

“Even the parts runners can come out to help,” he added.

SUPPLIES AND PROCEDURES

McEvoy said he continues to monitor the charges on his credit card bills. He said some credit card companies would not notify a business when interest rates have gone up. He said that credit card companies would also charge for paper invoices, but getting an invoice online or via e-mail is usually free - another way to save money. “Shop around for credit card processing companies,” he added.

Shelly said he is close to purchasing credit card swipers for his trucks, but needs to confirm that the cost will be justified. He said that he can calculate the amount of sales per truck or employee and then see if the revenues justify a more efficient card swiper.

And speaking of credit card purchases, McEvoy said his trucks must be refueled at one particular gas station that keeps a detailed log of all gas purchases and verifies that only the company trucks are being refueled. “There is no fudging allowed,” he said. “This move saves me about $400 to $500 a month in gas purchases.”

Shelly noted that he is watching his office supplies too. He wants to cut down on the number of supplies that are being ordered and monitors the purchases closely.

PRODUCTIVITY WOES

Productivity is a problem and these MIACCA contractors suggested a couple of ways to combat the “non-billable hours issue.”

One is cell phone usage. To a person, each contractor said that personal cell phone usage obstructs work and makes things go slower. Each has a policy in place that restricts or prohibits personal cell phone usage while on the job. If a tech has to use a cell phone, it should be business-related.

McEvoy said, “I encourage my guys to call a manufacturer’s tech support team if they have a problem they can’t solve. I prefer they did this rather than stand around and look at a problem they can’t solve.”

Publication date: 08/11/2008