By March 22, 2014 0 Comments Read More →

Do You Analyze Financial Information to Drive Facility Decisions?

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Managing facilities is by its nature financially driven. The high costs of real estate, the cost of energy and maintenance and the perception that an organization’s facilities are a cost drag rather than a value to the organization are contributing factors.

If you don’t have enough information and aren’t able to analyze that information, you can’t make facility decisions (and develop your business case to the organization) for your initiatives and you can’t optimize your costs while maintaining the level of services you want to deliver.

I’m surprised how many Facilities departments don’t have the information they should have. Either they don’t have their own systems or their organization’s systems aren’t responsive to their information needs. That includes not capturing enough data to enable analysis. For instance, financial systems that don’t provide enough well structured sub-accounts, grouping information at so high a level that they become impossible to manage, analyze and impact. Or even worst, having the sub-accounts and complaining about the coding required on invoices or not bothering with the details and capturing the financial data in one general sub account because it’s easier, rather than recognizing and using the information for their benefit.

This type of data is critical to making facility decisions that improve results, but you have to turn it into information and use it to make decisions or justify your business case for new initiatives, funding or resources.

In one example, I was engaged to do a cost analysis of work order invoices for a national company.

They provided a data dump of 14,000 transactions for a 12 month period, totaling almost $2M in spending on small work orders across their entire portfolio. These invoices were approved by local or regional facility managers one at a time, so they didn’t have a chance to see the patterns. Only when I started to analyze the transactions as a whole did patterns emerge. While 14,000 transactions is a lot, excel is a great tool to easily summarize, compare and analyze.

The patterns included very different costs for the same type of work in different cities, multiple suppliers in the same building or city doing the same type of work, literally crossing each other coming in and out of the building and what seemed like very little control over what amounted to a large amount of money spent a little at a time. And, each of those transactions required someone to receive, sign-off on the separate invoice, forward it to accounting for entry into the financial system and then issue a check.

The analysis identified a number of issues that should be changed to reduce costs. It including identical work being done in two different cities but costing twice as much in one of them, work being done that was the responsibility of the landlord and doing so much general handyman work in one major high-rise using over-qualified contractors that they could have engaged a full time handyman resource to do the work at a lower total cost while improving service.

This type of analysis develops information and knowledge you can use to improve services and lower costs, but it requires two things – data and time.

It also means you need to look at details and not just rely on the high level roll-ups and as was the case here, considering the per-job cost of small work orders to be insignificant, relative to their overall occupancy costs,  to pay attention to.

Start by making sure you have the kind of data and information you need to make decisions, but not so much that you are drowning in it. Then take the time to analyze it and take action.

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