Small Business Insights

Cost-finding mission

Optional RATES company, LLC specializes in discovering overpayments

Michael Paulk

When he founded a consultancy specializing in helping firms find efficiencies and savings in their tax payments and energy usage, H. Woodson `Woody' McRae found something else -- resistance.

His firm, Optional Rates Co. LLC, specializes in ferreting out overpayments and waste in the utility bills of manufacturing companies in the Mid-South. In addition, in these times of convoluted and ever-changing tax laws that determine what is taxable for industries, McRae and his firm also find instances in which companies are paying taxes on equipment and inventory for which they could have gotten an abatement.

"We like to refer to it as cost avoidance," McRae says.

But it wasn't always easy, and to an extent still isn't, for McRae and his associates to get through many companies' doors. Because providing their expertise involves clients providing them with a chance to become intimately familiar with portions of their operations, as well as intruding on someone's in-house responsibilities, often it is not easy to convince companies that his services can be useful, he says.

Many lower-level managers who are in charge of utility related issues or tax rolls may not have a motivation to seek help with issues if a problem is not readily apparent, McRae says.

Founded in 1986 by McRae, a former writer of software aimed at controlling the energy usage of computers and equipment, as Utility Control Corp., the firm fought an uphill battle against perceptions that its service was redundant with companies' in-house expertise. But Optional Rates contends that its ability to stay current on tax law, utility rates and programs and network with government and utility officials is far more extensive than almost any industrial company is capable of.

For Optional Rates, when it comes to utilities the firm views its usefulness as being willing to be vigilant about issues in a field that most firms view as mundane. The person in charge of utilities does not understand the billing statement or all of the above, McRae says.

When Optional Rates goes into a business to look at its operations, first it reviews obscure tax areas where it can eliminate overpayment among manufacturing and distribution concerns. McRae and his associates concentrate on how their client can find qualifying tax exempt and reduced tax areas in sales/use tax on industrial equipment and materials, federal excise tax on industrial items and property tax.

Second comes a review of the client's utility, water, sewer, telecommunications and petroleum accounts with a concentration on the configuration and history of metering, rate structures, clauses, riders, billings and multipliers.

McRae's firm only gets paid if it finds overpayment in its client processes -- sharing half of what it finds for a period of three years. In the past eight years Optional Rates claims its success rate is over 76% -- discovering over $3 million in savings for its industrial clients. McRae says that firms are susceptible to "overpayment by oversight" because of DIS-REGARDING potential billing errors, refunds, credits and exemptions; utility tarriffs; "new" legislation and law updates, and "silent" court rulings.

CONTACT staff writer Michael Paulk at 259-1726 or by e-mail at mpaulk@bizjournals.com