Growth by Acquisitions Makes Cost Cutting Strategies a Priority

Cost cutting at operations level is more often than not one of the top 3 objectives of a merger or a growth by acquisition strategy. 

 As part of an ambitious growth plan, the airline company on which this brief case study focuses had added 100+ locations to a network of 200+ airport locations across 6 continents. Taking care of the extra workload and cost cutting had become their #1 and #2 priorities.

Challenge

Contrary to the general reputation of the airline industry for shoddy service, our client had a strong track record of success in customer service satisfaction, both on the cargo side and the executive service side. With a team of passionate employees, the airline worked hard to ensure their clients would receive best-in-class service.

This required a total commitment to streamlining back-office processes. The addition of 100+ service locations threatened to disrupt the airline’s back-office operations, with 500+ vendors to be integrated into their accounting software, 1000s of additional invoices to be processed each month, and a large number of technology/telecom and utility services to monitor and pay. Any failure in the process would trigger a service interruption at any location, a majorly disruptive event for operations.

To compound the problems, the Accounts Payable department of the airline was already spread thin.

Opportunity

Considering the risk that many back-office business processes would break under pressure, the airline management decided to hire the services of RadiusPoint to help absorb the massive workload, strengthen the telecom expense management and utility expense management processes, and reach the cost cutting objectives of an aggressive growth-by-acquisitions strategy.

Results

As mentioned, the acquisitions added 500+ vendors that had to be set up in the accounting software, and each vendor had to have a Transfer of Liability completed for each account.  Each Transfer of Liability took approximately 1 hour to complete, i.e. obtaining the proper paperwork required by each vendor and getting all appropriate vendor and client signatures. RadiusPoint contacted each vendor, requested the Transfer of Liability documents, completed the documents with all signatures, and sent back the information to each vendor. This enabled telecom and utility services to be continued with no interruption at each location.

In the framework of its TEM and UEM service mandate, RadiusPoint took over monthly vendor bill processing from receipt to audit and dispute, all the way to payment and service verification. To this end, each vendor invoice was set up by phone number (telecom) or meter number (utility) in ExpenseLogic™, our business intelligence SaaS platform. ExpenseLogic enables a real-time audit of all telecom and utility bills, adjustments of vendor billing errors, on-time payment, and granular management reporting.

Our TEM and UEM services generate significant cost cutting benefits both in the form of:

Hard-dollar savings by:

  • Detecting and avoiding billing errors,
  • Tracking resource use and waste
  • Identifying unallocated lines and devices,

and soft-dollar savings by:

  • Automating and streamlining certain business processes,
  • Decreasing paid labor time spent on these processes,
  • Allowing the reallocation of the corresponding labor to other value-generating tasks and processes,
  • Reporting at a granular data, enabling management to make quicker, better-informed decisions.

RadiusPoint’s mission resulted in (a) reducing the acquisition-related workload for the Accounts Payable team by close to 250 hours, (b) avoiding disruptive telecom/utility service interruptions, and (c) other hard-dollar cost cutting as described above.

In total, our Telecom Expense Management and Utility Expense Management services generate a Return on Investment averaging over 400% each month.

Is your organization preparing an acquisition of significant size? Do you have a cost cutting plan of any significant scope? Call RadiusPoint to discuss how our TEM/UEM team could help your organization reach its cost reduction objective and streamline its vendor billing audit and processing.

Additional resource:
HBR study on M&As and their objectives