Too poor to afford low quality services?

Same old story

I know it may sound like empty words and a widely used expression, but it is often true in real life. If I were to share my own experience, one of the following cases mostly occurs:

  • our supplier has been with us since the beginning (we were a small company at the time, but we grew in the meantime and they are only capable of supporting small businesses);
  • although the quality of services is not their strength, at least they are low cost and we do not believe a more expensive service would be of better quality;
  • if I were to look for a different supplier in the jungle out there, chances are that I will end up with an even worse supplier…

I am aware the above scenarios are more likely to occur for continuous services, such as accounting, financial audit, legal support, cleaning or supply of stationaries. It does apply, however, for other types of services: for instance, even if your last team building was poorly organized by your supplier, you are likely to use their services again, as you know at least what to expect for the next event. Changing your supplier could prove a worse decision in the end, so you don’t want to take any more chances.

We are, therefore, systematically anxious: the fear of change is normal, especially given the services market context in Romania. Quite often you are just flooded with various service offerings (even as you are finding your way out of the Chamber of Commerce building on the day you registered your new company) which are anything but trustworthy. Even if you want to find a trustworthy supplier, you wouldn’t know where to start looking for one and how to validate it. You will, then, rely on your network (friends and partners) who will (at most) be able to provide you with a review which is most likely biased. The alternative is to search the market yourself, thus ending up finding the suppliers who invested most in marketing rather than the great ones.

The high cost of a low-priced service

I have seen companies paying the ultimate price on several occasions. As they were trying to save money when buying accounting services, they missed investment opportunities – the low-cost accountant did not provide them with the high-standard credible reports required to close the investment round. In other instances, they ended up paying taxes they shouldn’t have and even penalties and fines following the authorities’ audits.  Dismissing employees without carefully considering all relevant legislation (and without seeking advice from a professional) put the company in a difficult position, having to pay compensations to the former employee. Although such unpleasant situations may still occur, you can, at least, manage the risks and mitigate them by choosing the right partners who possess the right expertise and sell it at the right price.

We often avoid benchmarking our suppliers against their competitors and assessing other offers because there are no tools and formal processes to help us do that, there is not enough credible and relevant information out there. Besides, you risk spending a lot of time with the benchmarking attempt, only to find yourself stuck and with no return of the invested time and effort.

Complex issues, simple solutions

A software platform bringing together all relevant service providers, allowing users to do complex searches, with mechanisms to compare and filter the information and complex data analytics, would help. A platform which allows users to see the detailed descriptions of the suppliers’ services and operating models, as well as information on the suppliers’ client base and detailed reviews collected from said clients will facilitate providers’ selection and will motivate users to contribute as well, by reviewing their vendors to further help their peer professionals.

In most cases I select the vendors by comparing offers containing inconsistent information, in the format they are imposing. What if all information were standardized, easy to compare in a format I am familiar with? I strongly believe that it would help me make the right decisions for my business.

Having this option readily available would streamline the procurement process and save resources I am currently spending on qualifying the suppliers. It would also heal my fear of change and would implicitly ease my decision to pay the fair price for better services.

Our goal is to heal your fear of change and enable you to maximize the benefits of the services procurement process. Find out more in our next article.

Sorin Moldovan – CFO ENSO Business Services

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