Omikron Advisors

Premier Cost Recovery Consultants

Cost Recovery – Fact vs. Fiction

Posted on | July 12, 2011 | 8 Comments

Usually when people think of Cost Recovery, or are approached by a Cost Recovery Consultant, they proceed cautiously (which is appropriate) but often they think, “this is too good to be true” (which is not correct). Contingency fee based consulting is a proven method of providing high value services services while at the same time ensuring that the clients interests are safeguarded.

One of the main reasons for the difficulty of accepting the value of a Cost Recovery Consultant is the need to disclose certain information that is usually not discussed (except for perhaps lawyers or accountants). When discussing financial issues people tend to keep this information tightly held, especially with people they do not know. Creating a trust relationship is critical, but then so is time, and here is the major conundrum… the longer it takes to build the trust relationship between a Cost Recovery Consultant and their current/prospective client, the more money is left on the table. So then, what is the process that should be employed to reconcile these two issues?

Cost Recovery works precisely because it is a contingency fee based business, so the alignment between the Cost Recovery Consultants goals and those of our clients are exactly the same: we want to save our clients as much money as possible, as quickly as possible. Cost Recovery Consultants want to recover the maximum savings to which our clients are entitle because that is the way we also maximize our income. This direct alignment of goals is the best, and most efficient, way to ensure that a trust relationship is built and savings can be maximized.

Often for customers, or their Accountants/CPA’s, there is a serious concern that the Cost Recovery Consultant is going to be at odds with their CPA’s but in reality nothing is further from the truth. The Consultants are there to add value to any financial organization. Most organizations cannot afford, or do not want to invest in, specialty auditors and employees focusing on non-core activities. This is where the Cost Recovery Consultants help the most… we can bring the specializations needed (once) so that our customers can focus on their business. Additionally, no one (not even the most talented and intelligent CPA) can know everything about every subject so we bring our specialists in to help “fill in the gaps”. We are committed to helping, not creating conflict!

Finally, it is assumed that the process is complicated, takes a lot of time for the business owners/executives (or their representatives) and for the Accounting Department/CPA. Again, this is very much not the case. The initial meetings take less than one hour (depending on the number of products that are applicable), and usually only 1/2 hour per product. The gathering of data has concise requirements and is usually handled by the Accounting group and the Consultant. Any follow up requirements will be clearly articulated and throughout the process the Consultant will make sure that everyone is kept fully informed of the project timelines and milestones. Depending on the product savings can be realized in as little as 30 days while some may take up to 60 days.

So, the facts versus fiction are:

- Cost Recovery and Customer Goals are EXACTLY the same
- The amount of time required, while product dependent, usually is 1/2 hour for the initial meeting.
- Most of the required documentation is handled by the Accounting Department/CPA and the Consultant.
- All project progress and milestones will be fully and regularly communicated to all interested parties.
- Savings can result in as little as 30 days, but some products can take up to 60 days.

What is “Contingency-fee based Cost Recovery”?

Posted on | February 22, 2011 | 41 Comments

Contingency-fee based Cost Recovery Consulting is often promoted as being a FREE service. This is a marketing attempt to get people to look at their services and to test their products, stay on their website, make a “trial” call to engage the business opportunity. While this is all good and well, it is also misleading. As they say (whoever ‘they’ is), “nothing in life (or business) is free!”.

Usually when something is promoted as FREE people are skeptical. This is especially true for business executives who are quite aware that ‘free’ does not mean ‘free’. However, when ads talk about “free audit”, or “free survey” they have no basis on which to judge what their ultimate fees will be.

With contingency-fee based consulting, it is very similar to the legal profession where the attorney gets paid only if they win. This is a big risk for both the attorney and the client because trials can take a very long time. However, unlike the legal profession, providing a service on a contingency basis for Cost Recovery, the discovery time is usually measured in days or weeks. The reality is that no service is free, and all Cost Recovery consultancies want to be paid… philanthropy is all good and well, and sometimes the fees will be donated, but not as a matter of course.

Depending upon the service, the fee structure changes. Some may take 50% of the savings found from overcharges the client has paid. Some will take a residual of future savings plus some percentage of savings found (over-payments), and there are other models that can be negotiated.

The requirements for successful program participation should be clearly discussed with the Cost Recovery consultant. This will ensure that success for both the client, and the consultant, is likely.

Also, it should be noted that in a successful relationship, the accounting firm (CPA), attorneys and all other professional services providers are partners with the Cost Recovery consultant. Some clients worry that the Cost Recovery consultant will negatively impact long-term and important relationships with their professional services firms. The opposite, however, is actually the truth. Most of the products are highly specialized and require expertise that is not readily available to your business partners. This is the reason that Cost Recovery consultants exist in the first place! Also, most of the information that must be collected is gotten from your professional service firms, and generally take very littel time on the part of the client to get started.

Some firms try to harness all fo the expertise within their firms, while other (like Omikron Advisors) prefer to partner with industry leading experts in each respective field. The advantage of partnering with experts, leading companies, is that it is possible to continue to add products to service our clients without having to develop in-house skills… we just need to find world-class providers. Also, our cost structure is lower so we can keep our fees competitive. The downside to this approach is that there are multiple contracts, one with each service provider (unless they provide multiple services). However, the Omikron Advisor representative is always the contact point, the go-between, for the client and the service provider. The job of the Omikron Advisor is to keep all clients up to date with all status, collect all documents confidentially, and to make sure the project runs smoothly.

Finally, rest assured that all data collected is kept in strict confidentiality. After all engagements, the data collected is either destroyed or returned.

For more information, please see our site at Omikron Advisors.

Cost Recovery: Smart for any Business

Posted on | February 22, 2011 | 45 Comments

Cost Recovery is essentially the business of examining existing and past invoices that companies have been billed, determining whether or not those invoices were fair for the services procured, and if the billing (invoice amount) were incorrect, affecting the recovery of the over payments. In other words, getting back money that businesses have paid for services they needed, but were over billed.

It is sad (but true) fact that most businesses over pay for their basic services. This is especially true when the companies have a long-term, regularly billed expense. Categories of this type of expense include telecom (phone and internet), property taxes, credit card fees and waste disposal and recovery. Another category of expense that are often not examined closely are property tax bills (it is often assumed that they cannot be successfully challenged) and depreciation schedules (cost segregation). Additionally, categories such as energy tax credits, hiring tax credits and manufacturing credits are often overlooked and not utilized leading to over payments and a decrease in cash flow and operating profits.

There are two main categories for Cost Recovery Consultants: Those that charge an up-front fee, and those that work on a contingency basis. Additionally, within both categories, the consultants will either perform the audits and recovery themselves, or they will partner with companies that are expert in their respective fields. In the latter case, the consultant effectively acts as an broker of cost recovery services, matching service providers (telecom, tax, commercial property…) to the needs of the client.

Both models yield competent and commercially successful results for both business clients and the consulting firm. However, from a risk/benefit point of view the contingency model offers less risk (but potentially less return). Think of the contingency model as that of a contingency law firm – the consultant does not get paid unless significant savings are found. The contingency-based consultant gets paid as a percent of savings as opposed to a fixed fee, so the payments can potentially be much larger. However, all of the risk is assumed by the consultant and not the client, so the higher fees are justified. Also, in general, the contingency based consultant will not on a client unless the minimum threshold for fee is met.

Whichever solution makes sense for a specific business is contingent upon the business model for a specific company. However, notwithstanding the business model, all businesses should take advantage of an independent, competent third party audit especially if it involves not risk.

Why leave money on the table?

Omikron Advisors New Look

Posted on | November 19, 2010 | 5 Comments

We are constantly striving to improve our services, our products and the way we interact with our customers. We hope you like this new look!

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