Situation: A company is concerned about increased energy expense as prices rise, and the impact on the bottom line. Pricing in their market is competitive. What’s the best way to recover these costs? Can you pass higher expenses on to customers?
Advice from the CEOs:
- Businesses regularly pass on their increased gas and transportation costs to both commercial and retail customers as these costs rise.
- This isn’t just true for gas and transportation expenses. As other expenses rise, companies regularly increase their pricing to account for increased costs.
- Is it necessary to send out an announcement letter about the company’s intent to do this?
- Some companies do. Others just start adding a line with a gas surcharge to their invoices. This is happening frequently enough so that most customers just pay it without question.
- What do you do if someone objects?
- If a customer objects, you always have the option to credit them the charge.
- Again, most customers are so accustomed to seeing and tolerating these costs that they don’t object.
- Look at the company accounting system. Are costs and performance trackable by business segment? Performance numbers show both the impact and magnitude of energy cost and improve the ability to manage the business.
- If the talent is not present to either improve the current accounting system or to shift to better software, bring in part time accounting help. A good source is Robert Half International/AccountTemps. The cost of adjusting the current system will be recovered as the company gains more control over expenses by segment.