How to Save a Lot of Money

Create a “request for bid” letter. This should say you are requesting a formal bid from your company. List each item and service with as much detail as possible, such as size, description, quantity and frequency of service. Include a reply due date. (If you would like a sample letter, my contact information is at the end of this column.)

Determine what items and services you purchase from each vendor. Identify at least two other vendors who supply the same at the standards you expect, ranging from quality to quantity to timeliness of delivery. In no case should you accept poor quality or service to obtain the savings. Be aware of any special arrangements or contracts with particular vendors that need clarification before bidding starts. Obtain at least three bids per item so you can accurately compare prices.

Send the letters. Be prepared for phone calls, e-mails and visits from concerned vendors who you have done business with for years but haven't seen for a while. These may be vendors who “high grossed” you. Stand your ground.

Agree to a price. Ask to lock in it in for six months or more. Send acceptance letters to each of the vendors chosen. A thank-you letter to vendors not chosen can aid in future bidding. Or call them and see if they are willing to negotiate the prices.

Remember, sometimes it's not just the price of the item that is important to compare. Make sure the correct sales tax rate is being charged on each bid. Environmental surcharges should also be questioned to validate their legitimacy. Be on the lookout for “standard” price escalation clauses that exist in many contracts, allowing prices increases every year without notification to the dealership.

Develop a worksheet that lists the agreed-to prices for each item by vendor. Distribute the price listing to the appropriate managers and accounts payable.

As part of the invoice-approval process, the appropriate manager should verify that the invoice price agrees to the price on the worksheet. Before accounts payable prepares payment to each vendor, prices listed on the worksheet should be checked. Discrepancies should be questioned.