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Open book reporting

20 May 2020

In today’s facilities management marketplace there is still a reluctance for some client organisations to procure on an open book basis with fixed cost, risk adverse contracts being placed.

This is mainly driven by a mistrust and understanding of the process combined with a market misconception of what open book transparent accounting actually is.

We hear lots of reports of clients being promised something that is never really delivered.

Most suppliers in today’s market will agree to some version of Open Book Accounting which is primarily designed to facilitate trust and transparency between two parties, although from experience of multiple contract starts over recent years, there is very little evidence of this transparent approach in the marketplace.

Many say they do it but have a different version of what open book really means. Unfortunately, where this is the case it tarnishes the reputation of the industry.

WHAT DO WE DO

Since 2002 Incentive FM have been working with client partners delivering facilities management services with open book financial reporting as standard.

In depth open book reporting is the only way to offer full transparency when aiming to generate a true partnership between client and service partner.

HOW DOES THIS WORK

At the start of each budget year we negotiate, based on previous data, a budget which we operate.

As part of this process we agree a percentage of budget which will form our management fee which is fixed for the budget period.

Operating with a fixed management fee allows us to identify savings through multiple streams without financial penalty and, because it is fixed fee, any savings we make are returned directly to the client.

The general format of our financial reporting includes us providing you with a monthly expenditure report that tracks actual spend against an agreed budget.

The process of tracking actual spend happens on a monthly and year-to-date basis and this data is utilised in producing year end forecast spend; all three of which are tracked against the budgeted spend for the relevant time period.

This is prepared on real time basis using actual expenditure and invoice detail and committed expenditure accruals basis were we integrate purchase order information from our Concept Evolution CAFM system driving financial P&L preparation.

We have a culture of efficient partnership working and when we deliver savings we provide a full business case that can utilise the saving for reinvestment back to our client.

This may be on another areas of the contract to further drive site efficiencies or enhance the experience or straight back to the client as a financial benefit. This is the cultural backbone of our business.

We are happy to provide full disclosure of all information to our staff and clients so we can all work together to continually improve.

Our open book model is truly that, and nothing makes us prouder than giving our clients money back at the end of the year by creating efficiencies, beating budget as well as delivering an exceptional customer experience.

This transparent approach also allows us to operate a Gainshare model within the contractual arrangement and also to deliver an effective Risk & Reward mechanism with a percentage of our management fee at risk should we fail to perform against the agreed KPIs and budget.

The reward element for over achievement which is shared with our staff also works as a great morale booster for our teams where we have the scheme in place.

HOW DOES IT DIFFERENTIATE US

Delivering a truly open book commercial model is unique with no other service company providing the same level of openness and clarity.

We believe USP’s would be:
• Complete financial transparency down to invoice level
• We save our clients money - If we don’t spend any of the budget we give it back or reinvest in line with partnership requirements
• Our aim is to be our clients Trusted Advisor
• Partnership working

Reinvestment of contract underspend back into the client workplace also reinforces a positive partnership approach and helps the client differentiate themselves within their market by creating great places to visit and great places to work.

Incentive FM’s philosophy was, and still is, open book and clarity.

“We believe in this whole mission of transparency,” says Bruce McDonnell. “The customers who believe in it and like that style engage with you and don’t go anywhere else.”

“Trust is built on a platform of transparency and openness, when this is delivered is when you have a real opportunity for partnership working. We are not on a single company crusade but we know the difference that this makes and for us allows us to work with our clients in extremely long partnerships.”


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