How to Protect your Business from Hidden Waste Fees
As businesses seek to control their operational expenditure, the costs of waste management can sometimes fly under the radar. The large national haulers take advantage of this lack of attention with a range of strategies to increase their profits.
In this White Paper, we discuss the main strategies these companies utilize, and provide you with the guidance to ensure that your company never unwittingly pays more than it should to manage its waste.
At the start of your contract, your waste management company provides you with a regular sized bin for your waste. They then set up a collection frequency and start collecting your waste. If the bin is regularly overfilled, they will increase the frequency of collections, but if the bins are being collected only half full, there is a strong probability that they won’t inform you. Hauling half-empty containers benefits the waste contractor because they invoice you for each lift.
A company’s waste volumes may rise and fall throughout the year, in line with peaks and troughs in business activity. Equally, over the course of your contract, waste quantities may gradually increase or decrease.
A conscientious waste management partner will adjust service frequency or bin size accordingly, so that you are not caught with overflowing bins, or being charged to move air. This process, known as ‘right-sizing’, is a continuous exercise that ensures charges are consistently optimized.
How to protect your business
If you are unsure whether your waste contractor is servicing your bins efficiently, keep a record of bin volumes for a few weeks or months to see how full they are when they are emptied, and routinely check off the weights of your roll off loads. If you have a compactor for your waste or cardboard, check the pressure gauge as an indication of how full it is. This information will show you whether you need to get your waste contractor to downsize the containers that you’re using, or reduce the frequency of collections.
Larger bins and compactors generally cost more to rent, so reducing their size will lower your monthly rental costs. However, reducing the frequency of collections for the same size bin may save you more money, depending on the haulage rates. Just be careful of inactivity charges and monthly minimum hauls.
Too much waste being sent to landfill
Many of the major waste companies own the landfill sites that they haul your waste to. This means that it pays for them to fill their landfills with your waste, rather than to separate materials for recycling.
However, this isn’t economically or environmentally the best strategy for your business. Recycling a greater proportion of your waste provides your business with the opportunity to avoid paying landfill disposal fees or generate rebates for valuable materials such as metals. It also ensures that your business is in line with the EPA guidelines to reduce, reuse and recycle as much of your waste as possible.
How to protect your business
A simple strategy to help you understand the composition of your waste, and to identify opportunities for recycling and waste diversion, is to complete a basic waste audit.
This means taking a look through your trash, and identifying if there are materials that could be recycled. Rather than auditing a large waste container, it can be easier to observe the bins, bags or processing lines that are destined for the trash.
If you notice lots of paper, cans, plastics or glass, these materials can easily be diverted to a single stream recycling bin.
If there is lots of cardboard in your trash, then this should be diverted from your waste stream, because not only is it recyclable, but it also takes up valuable volume in your more expensive trash container. If there are significant quantities, then it could be financially beneficial to get a compactor for this material stream to offset haulage costs.
For businesses with multiple locations, conducting right-sizing and waste audit exercises at each site can be too large a task to manage internally. In this case, it is advisable to partner with a waste management company that can optimize your waste and recycling for you. A good partner will perform right-sizing and waste audits across your entire business in order to identify the most cost effective and efficient strategies to manage your waste. An even better partner will do this routinely and will offer to do so without being asked.
Erroneous Invoicing and Hidden Fees
Large national haulers are notorious for over-charging and including erroneous fees on their invoices. These increased fees can be in the form of multiple price hikes throughout the year, creative charges appearing on the invoice, or confusing services and surcharges that they hope most people won’t be able to verify.
As many as 80% of the waste invoices NWA audits for our customers contain hidden fees, over-charges, or billing errors which need to be contested. When these additional costs are totaled across multiple locations, they can have a significant financial impact on your business.
Waste bills can be confusing to understand, with several lines of detail for different fees. Common additional charges that require investigation are:
- Extra pickup
If the hauler has removed extra trash from overflowing containers or has undertaken additional pickups beyond those specified in the service agreement, they will charge an extra fee or a fee to pick up and tip your bin. These fees are usually disproportionately priced compared to the monthly service rate.
- Overweight container
An additional fee may be charged for hauling and tipping containers that exceed the weight limit agreed in your service agreement. As heavier loads cost more, it is advantageous to watch for weights that seem excessive for the material type. This can be an indication of material contamination, water penetration, or simple overbilling.
- Extra container or Additional pick up days
If your locations have the authority to call for an additional container or increase the frequency of pick ups, your spend will increase and in most cases, it will remain at that elevated level regardless if the need was temporary.
These fees may be acceptable if you have audited them against site activity and can substantiate that they occurred. However, there are other fees that can appear on invoices from the country’s major waste companies that may not be so bone fide. These include:
- Fuel surcharges
One major waste hauler explains their Fuel Surcharge as allowing the company to keep up with the changing costs of fuels, including diesel, in order to achieve necessary operating margins. However, it is calculated as a percentage of all invoice charges, even those that are not directly affected by diesel prices (e.g. disposal fees, rent, etc). It should also be noted that the base rate of diesel (0.95$/gallon) that they compare costs against, hasn’t been that low since December 2001.
- Regulatory Cost Regulatory Cost Recovery Charge
One major waste management firm calculates this charge as a percentage of all invoice fees, plus the Fuel Surcharge, plus the Environmental Charge. The costs that it covers are standard operating costs for all waste management companies (e.g. host community fees and waste disposal taxes), but most companies do not charge their customers an additional fee to cover them.
- Environmental charge
One major waste management firm describes this fee, calculated as 16% of all invoice charges, as covering their costs to “operate in a safe and environmentally responsible manner”. All licensed waste management firms and haulers have the same legal obligation to operate in a safe and environmentally responsible manner, but not all companies charge an additional fee to do so. In addition, this firm includes the cost of the Fuel Surcharge when calculating the Environmental Charge. This results in your business paying a percentage on top of another fictitious charge.
- Administrative charges
This is explained as being for the cost of generating paper invoices and processing payments. It can be avoided by signing up for automatic, pre-authorized payment, although this makes it easier for the waste company to overcharge on invoices, since it only allows for invoices to be contested after they have already been paid. This is a more time-consuming and challenging process than reviewing each invoice and contesting erroneous charges before authorizing payment.
How to protect your business
Before signing a new contract with a waste management company, carefully review the service agreement and query any additional fees or charges. Also, look for terms that allow for price increases to keep the company at certain operating margins or CPI’s with a specific additional percentage stipulated (i.e. CPI + 4%). It is much easier to resolve these queries before entering into an agreement, and it will save you considerable time and money over the course of the contract. Once you are in a service agreement with a company, it is important to carefully review your waste invoices every month for the surcharges and fees detailed above.
As variations in business activity can influence how much waste your business produces, it can be helpful to compare waste bills against business activity. If peaks and troughs in business activity can be predicted, then waste costs can be proactively managed by pre-ordering additional bins or collections. This will help to protect your business from penalty charges for overflowing bins or last minute collections. Equally, during lower business periods, you may be able to save money on your waste bills by preemptively reducing service schedules.
If your business has multiple sites, auditing all of these invoices may be too great an administrative burden to manage internally. If this is the case, then it can be beneficial to partner with a professional, independent waste contractor. They will audit waste invoices for all site locations, querying any additional charges and contesting invoices on your behalf. The savings can be considerable, and across multiple sites can run into the hundreds of thousands over the course of a year.
Many of the country’s largest waste companies make significant profits by benefiting from the lack of oversight or experience that some of their customers have with respect to their waste operations and bills.
The good news is that it doesn’t have to be like this. A professional, independent waste partner will proactively optimize your operations, ensuring that your waste is being managed as efficiently and responsibly as possible, at the same time as ensuring that you are not overpaying in hidden fees and bogus charges.