As a business owner, there are essentially two ways to boost profits. You can either:
- Increase revenues (i.e., generate more sales)
- Reduce costs (i.e., cut some expenses)
Most companies focus on the former. Although there’s no limit to how much money you can make, it’s not possible to cut costs once you reach a certain threshold. If you haven’t already reached that threshold, then reducing expenses can — and will — make your business more profitable.
Now, you might be tempted to cut costs via customary methods — such as using cheaper labor, suppliers or materials. These strategies definitely work, but they have certain downsides:
- Finding “cheaper” is a time-consuming process. You’ve got to search, validate, train and negotiate in order to start reaping any benefits.
- Going “cheaper” often leads to a reduction in quality, and this can negatively impact your ability to generate future sales.
Fortunately, there are strategies that allow you to save money without sacrificing quality or investing lots of time and effort. In fact, some of the tips below are pretty painless.
Let’s take a look.
1. Auto-Saving Apps
Qapital is a free smartphone app that can help you automatically partition and save every dollar your business earns. For example, you can program Qapital to direct 33 percent of every incoming sale to your “rainy day fund.”
Since that money doesn’t enter your primary bank account, you don’t see it or miss it.
Most important — you don’t spend it. With this approach, you’re basically creating a mandatory budget and forcing yourself to make do with the remaining 67 percent that wasn’t automatically squirreled away.
2. Going Paperless
Managing paper documents carries many costs — both for your wallet and the environment.
- Paper (obviously) is among the physical materials that also include the resources required to process/utilize that paper — printers, toners, copiers, envelopes and postage.
- You also have to factor in the employee hours spent printing, filing, retrieving, and sharing each document.
On the other hand, digitizing your records removes these costs:
- Document management can be done via computer. No printers, file cabinets or copy machines required.
- If you need to locate a file, simply do a keyword search. This retrieval process is so fast that you probably won’t need to “organize” documents into subfolders anymore.
- To send a document, you can either share a link or create an email attachment. With some platforms, you can even collaborate in real time, which increases your team’s productivity.
Your decision to go paperless also can help generate more sales, as customers increasingly prefer doing business with ecologically responsible companies.
Working from home is another powerful strategy for cutting costs:
- You don’t spend as much money on utilities.
- You don’t need as much on-site equipment; what you do maintain endures less wear and tear.
- You potentially qualify for a smaller office. You might even discover you don’t need a centralized location.
The true beauty: Allowing your staff to telecommute can boost productivity and morale. Admittedly, not all businesses are conducive to telecommuting (e.g., brick-and-mortar retail stores). But adopting flextime schedules offers many of the same benefits , including increased productivity and employee satisfaction.
4. Pay As You Go
It’s not uncommon for businesses to invest in on-site servers and software programs, but you often end up buying more capacity and features than you need.
A better strategy is to subscribe to software as a service (SaaS) tools. These cloud-based platforms are scalable, allowing you to buy as little or as much capacity as you need. If your requirements increase, you can pay for more features. When they decrease, just cut back accordingly.
You can extend this philosophy to other areas as well:
- Hire freelancers on a case-by-case basis instead of maintaining a large pool of full-time employees.
- Switch from unlimited Internet and phone packages to “pay-as-you-go” plans.
5. Payment Security
Every year, merchants lose an estimated $24 billion in fraudulent charges. According to the Department of Homeland Security, this trend is especially pronounced among small businesses that lack the resources to prevent cyberattacks, chargebacks and unauthorized purchases.
Even if you’re not at fault, you may be liable for those monetary damages. The true cost of payment fraud is much higher once you factor in …
- Time spent disputing and reversing fraudulent charges. This process can take weeks — sometimes months.
- Potential penalties, litigation and legal fees. Again, these are often unavoidable — even if you’re in the right.
- Lost consumer confidence in your payment infrastructure. This means you’ll generate fewer sales in the future.
Fortunately, these costs are largely avoidable if you invest in proper payment security. When shopping for processing solutions, you should pick a provider that specializes in:
- PCI-compliant data security
- Fraud management filters
- EMV card processing (in-person sales)
- Hosted payment pages (online sales)
- Point-to-point encryption and tokenization
Although no single security measure is 100 percent foolproof, combining some of the aforementioned prevention strategies can dramatically reduce your overall exposure. As a result, you’ll experience less fraud and pay fewer direct and hidden costs.
Want Other Ways to Save Money in Your Small Business?
If you’d like to learn about other ways to save money on processing costs, we’re here to help. Interchange fees are dependant upon significant factors including the type of business you operate, the type of credit card used, and average transaction size, to name a few. Are you paying the right interchange fees? You may be able to significantly reduce costs by working with an expert to understand your payment processing needs.