May 04, 2018

7 Tips to Managing Your Operating Expenses

By Don Catalano


7 Tips to Managing Your Operating Expenses.jpg
Some expenses related to occupying your rental property or office space are fixed and beyond your control; however, there are ways that you can save your company money. Properly managing your operating expenses can positively impact your bottom line. Check out these top tips on minimizing and controlling expenses to get started:


1. Mandate Discounts with Your Lease

Landlords who own one large building or maintain a sizable portfolio often have leverage with vendors. As a result, they can often negotiate and secure discounts that can be passed along to you in the form of savings; however, personal preference and other factors can lead landlords to take a higher-priced alternative. To reduce the risk of this happening, have language inserted into your lease that requires your landlord to take advantage of discounts.


2. Limit Your Landlord's Ability to Collect 

Unscrupulous landlords may try to profit off of expenses for the building that are passed along to you by adding profit and overhead to the amounts of invoices submitted by vendors and service providers. To avoid paying an unnecessary amount to pad your landlord's pockets, make sure there is language in your lease that prohibits your landlord from collecting more than they actually spend on expenses. When in doubt, ask for copies of invoices to confirm costs.


3. Protect Yourself from Mismanagement

While it is fair for you to reimburse the landlord for a portion of expenses that were necessary to maintain the building, you should not be liable for expenses that were incurred due to the negligence of your landlord. If systems are left in disrepair or repairs are postponed causing costs to increase, you need to be protected. That's why it's important that your lease specifies you are not liable for any expenses related to poor management.


4. Shield Yourself from Penalties 

When you reimburse your landlord for expenses, you should be able to trust that they will take that money and immediately pay their invoices. Unfortunately, clerical errors or negligence could result in late payments that rack up interest and penalty fees. You should not be responsible for covering these expenses, provided you submitted your own payments in a timely manner. Insert language in the lease that exempts you from reimbursing such fees.


5. Chip Away at Utility Costs

Implement policies that encourage conservation in the office to reduce your overall utility costs. Ensure that HVAC systems receive regular maintenance to avoid inefficient operation and costly repairs. Investing in green improvements like Energy Star laptops or LED lighting can pay for itself in reduced utility costs.


6. Request Reassessment

Changes in the market often occur more rapidly than the reassessment schedules for property taxes. If you believe your landlord and you, in turn, are being charged too much in light of the current market, see about requesting a reassessment. This can sometimes lead to dramatic reductions in costs.


7. Enlist the Help of Your Team

Cost reduction is everyone's job. Get managers on board to assist in spotting waste and inefficiencies that are adding up to unnecessary costs. Make sure that employees understand the benefits of keeping costs under control both in terms of their own financial futures and the success of the company as a whole.


Here are a few other articles to check out:

Be on Guard for Hidden CRE Costs

Reduce Your Commercial Occupancy Costs

Ways to Manage Commercial Operating Expenses


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Don Catalano

Don Catalano