In the current business climate and with ever increasing pricing pressure from your customers it's always good to know what your ongoing costs are going to be for essential business services. Small and medium sized businesses are increasingly turning to Service Providers who provide their services at a fixed price to help them predict cash flow and ensure that there are no nasty shocks at the end of the month when the invoices arrive.

Essential business services that are available on a Fixed Price basis tend to include IT Support, accountancy and HR Services but as the pressure to reduce and control costs increases this is likely to expand into other areas such as recruitment services, training and utilities.

It is common for business owners and managers when first presented with a business service at a fixed price to query why they would consider paying for a service that they may not be using all the time. The answer is simplely, that it's cheaper, allows easier budgeting and smoothes cash flow.

For example, a small business with 10 machines currently uses Ad Hoc IT Support Services from Company A at an hourly rate of £89.00 per hour. Some months they only use a few hours of time but other months they may use a great deal. A relatively simple software upgrade could take two hours per machine resulting in an invoice for that month of £1,780.00.

It is common for business owners and managers when first presented with a business service at a fixed price to query why they would consider paying for a service that they may not be using all the time
It is widely estimated by Managed IT Service providers that on average, over the course of a year each machine on a small business network would utilise around 12 hours of support time. Spread across 10 machines that is 120 hours in total. If Company A provided this 120 hours at £89.00 per hour it would cost £10,680 during the year with the uncertainly of not knowing when the next large invoice is about to arrive.

However, by contrast, utilising the Services of Company B who charge a Fixed Price of £40.00 per machine each month the same service would cost £5,760 during the year.

That represents a huge saving of nearly £5,000 during the course of the year with the added certainly of knowing what the next invoice is going to be and being able to accurately predict cash flow.

With fixed price accountancy services the potential savings are similar. According to Roderick Phillips, Managing Director of Quotient Financial Solutions, small business owners can often incur costs in the region of 2-3% of turnover for accounting services delivered on an ad hoc basis. By choosing to outsource their requirements on a Fixed Price basis the overall annual fee can be reduced to closer to 1% of turnover.

In addition to the financial and budgetary benefits there are also likely to be residual benefits of moving to a Fixed Price model. It is now directly in the suppliers interests to ensure that the services are delivered in the most efficient way possible.

Under the Ad Hoc payment method there may be the temptation for some less scrupulous suppliers to try and drag out any work since they are charging by the hour. Under a Fixed Price agreement it is in the Suppliers interests to do the work in the shortest amount of time but most importantly to ensure that it is done properly first time around.

To summarise, especially in times of economic uncertainty it is essential to minimise and control the costs of your essential Business Services and moving to Fixed Price Service Agreements with your Suppliers is a powerful tool in helping your business to achieve.

For more information visit www.constantIT.com