This edition of MRM's "Ask the Expert” features advice from Buyers Edge Platform. Please send questions to Modern Restaurant Management (MRM) magazine Executive Editor Barbara Castiglia at email@example.com.
Q: How Can I Prevent Contract Overlaps and Overpricing?
A: Contract overlaps and pricing have a lot of impact on restaurant operators and their business, especially for those without supply chain personnel or who are simply too busy to check or double check pricing contract structures.
As we move into a new dawn of operational risks, challenges and successes, it’s important that supply chain overlaps and over pricing are kept to a minimum. As supply chain shortages continue to challenge the restaurant industry, operators today simply cannot afford to lose their hard-earned cents on the dollar.
To better manage and keep a handle on contract management, operators can conduct routine invoice audits, automate their contract management, monitor price and market trends, and review their MDA’s. Here’s a deeper look at each:
Constant Auditing of Invoices
Staying proactive and informed on your spend allows operators to correct mistakes before they happen and helps achieve more accurate pricing. By reviewing your pricing before the month begins, operators can fix any errors before they are incorrectly billed. This prevents the need to request credits once overcharges have occurred.
The use of electronic invoice auditing also is increasing with foodservice operators. Going automated with your invoice auditing can ensure that you’re paying the correct prices for every item on every invoice. Through digital reports to distributors, credits and price corrections can be quickly resolved to fully maximize the value of all your negotiated contracts.
Automate Contract Management
Foodservice operators have numerous contracts in play at the same time. These documents are important and need to be monitored throughout their lifecycle to ensure terms are being honored and renewal dates are being tracked. The complex world of contract management can be overwhelming when done manually. You must constantly keep track of dates and make sure the right prices are being executed. Who has the time to do all of that when you are also running a restaurant or foodservice operation?
When an operator decides to take their contract management from manual to automated, they open the door for more time to focus on other areas of their operation. Using technology can be a convenient way to automate your contract workflow, increase efficiency, eliminate errors, and gain better insights into your business.
Monitor Price and Market Trends
Price fluctuation is common in the foodservice industry. When commodity prices change, things like your spend on food costs change along with it.
If market prices go up or down, having access to technology that monitors these fluctuations can ensure you are paying the right prices and show you how fluctuation impacts the different categories of your spend.
Look for Hidden Costs in your MDMs
We’ve written about this before and it’s never too late to review any of your master distribution agreement, especially in the wake of COVID and its new variants, which may or may not once again significantly impact supply chain issues. Hidden costs can anything from freight costs and fuel surcharges. So, if you can, remove fuel surcharges altogether from your contracts. IN addition, make sure you know when your contract ends and take advantage of the opportunity to re-negotiate contracts spanning 3-5 years (rather than 12 months).
Overall, technology will continue to play a large role in terms of keeping up with contracts and managing spend. And operators have more power than what they think. By having the right tools in place now, and removing contract language that include hidden costs, overlaps and over-spend can be greatly minimized.