Utilities management for expense reduction

In their continuing quest to reduce expenses in a sluggish economic environment, bankers often ignore routine monthly expenses, such as for utility services.

Is anyone at your bank managing that? Or is it just handled day-to-day, month in and month out? In our experience, the accounts payable department ensures that the utility company is billing the bank accordingly, at the right location, etc., but lacks the resources to verify that the usage, tariff or associated fees are correct. We have also found many situations in which banks were billed for utilities at closed branches and other properties.

It’s well past time to get on top of these wasted expenditures. The new approach is to create a team of subject experts to evaluate the bank’s utilities management process and suggest improvements for paying bills, verifying rate administration and examining applicable state and local usage tariffs. Technology is even available in the form of software, switches and control panels to monitor and manage utility costs.

Tedious Process

Energy invoice processing and payment for multiple site entities is a voluminous, tedious, time-consuming and expensive task for commercial, government, industrial and financial institutions like your bank. Utility management can greatly simplify the process and complete all of the work associated with maintaining utility/energy services for the bank’s multiple locations across its geographic footprint. It provides an unparalleled approach to energy bill services by seamlessly transferring energy invoice data and analysis that helps customers meet energy cost targets.

Such a program can, for example:

  • Enable the bank to reap cost savings from alternate method improvements in energy efficiency and reduce non-essential energy use;
  • Provide a multi-dimensional approach to energy audits, including both comparative and correlative analysis of each bill. Additional analytical support from an experienced account analyst who is assigned to the account will ensure each utility bill is examined once a year for consumption targets, tariff rates, closed/opened facilities and on-going utilization;
  • Reduce the internal costs to process and pay utility bills;
  • Help banks “go green” and “smart” with automated, smart building technology. Investments in automated, intelligent building equipment and management systems rapidly pay for themselves through reduced energy costs, increased facility reliability and improved data protection;
  • Improve regulatory compliance. Regulatory scrutiny is encroaching upon many areas of bank operations, including vendor relationships far beyond the core activities of a financial institution. Banks with wide-ranging footprints are challenged to monitor hundreds of vendor relationships related to facilities operations, a particularly daunting task for banks engaging in mergers and acquisitions.

We suggest the following four-step process:

Strategy: Align workplace initiatives with business objectives, creating a solid business case for change. Office facilities need to follow a standard policy to deal with utilities. Conservation should be the “new norm” and every location from the executive offices to distant branches must adopt the new practices to achieve planned cost-reduction objectives, if that is a major objective for the year.

For example, banks may want to make simple changes to internal temperature. A headquarters building could target a comfortable 72 degrees for the majority of the workday during warm weather (9 a.m. to 3 p.m.). Then, at 3 p.m., they could increase the temperature to 78 degrees and maintain that level until 9:00 a.m. the next day, including all weekends. This would not be a big difference, but it would make a big difference in cost.

Planning: Assess all components of the program – office/branch design, policies, technologies and training – and develop a practical implementation roadmap to mitigate risk and ensure a smooth adoption. The bank should start with an evaluation process to determine a current baseline case versus the future footprint of the utilities management initiative. Conduct interviews with key managers and your buildings’ facilities maintenance staff. Also, if necessary, third-party suppliers should be asked to make presentations on their functionalities and services.

Implementation: Bring everyone together, including Information Technology, Human Resources, real estate and executive teams, to make sure new approaches are merged with existing processes. Also establish and benchmark key metrics to monitor program success moving forward. For energy savings, for example, this might look like a specific percent of reductions in electric (KWH), natural gas (BTU) and water (GAL). Start small – maybe between 3% and 5% – then move up from there. You should also consider how to communicate the initiatives to the general public, customers and your employees. You may do this by displaying large “Go Green” thermostat charts that monitor monthly savings and promote the bank-wide commitment in the community.

Management: Provide ongoing management and oversight, either onsite or off, to monitor performance, ensure goals are met and make strategic recommendations to improve the program as needed.

Deploying such a utilities management program can reduce a bank’s utilities expenses by between 10% and 15% a year. It helps to develop “centers of excellence” in several areas to reduce costs while improving service levels.

Mr. Gismondi is managing director of Mooresville, N.C.-based Vitex, Inc., a bank consulting firm, focused on helping banks ignite performance, improve efficiencies and increase profitability. He can be reached at [email protected]