5 Ways to Cut Costs by Banking Smarter
All business owners could use more money, but how do we make the most of what we have? One way to save some cash is to rethink the way you use your bank. Banks are more than just storage units for your money, and whether it’s renegotiating rates, embracing online solutions, or switching banks altogether, there are diverse options to stretch your dollar. We’ve whittled them down to five sure-fire tips to help your company save money and cut costs by investing smarter.
#1. Opt-Out of Overdraft Protection
Overdraft protection plans seem to be a great fallback plan in times of financial insecurity, but they might not actually be protecting your investments.
The Consumer Financial Protection Bureau reports that the average banker who opts-in to an overdraft protection option ends up paying seven times as much as customers who opt-out. Since the average overdraft fee is about 34 dollars and most banks will let you incur multiple fees in a single day, overdraft protection can turn that quick latte and stop for gas into a very expensive morning.
Many customers just don’t realize they have the option to opt-out. In fact, according to a survey conducted by Pew, three out of four individuals don’t know they can decline a transaction without incurring an additional fee, so just imagine the impact this can have on your business’ bottom line.
You can prevent the excess charges by using simple tools like banking apps that give you low-balance alerts when your balance enters the red zone, by linking your company account to a savings account or credit card for an added level of protection, or by creating a budget that includes your automatic withdrawals.
#2. Cut Credit Card Costs
As a business owner, credit card interest rates can take a big chunk out of your profits. While renegotiating your interest rate with your credit card company might be an uncomfortable plan to execute, it can have a significant impact on your company’s revenue stream.
Most credit card companies will reduce interest rates, waive late payment fees, and lower (or drop) annual fees when asked by customers. Matt Schultz, senior industry analyst at Creditcards.com, says “It is really as simple as picking up the phone and asking nicely.”
Erin El Issa at Nerdwallet suggests that another way to reduce interest rates is to make multiple payments each month. Credit card companies determine your interest rates based on your average daily balance, not your end of the month balance, so making payments more often can actually reduce your company’s overall interest rate.
#3. Use Online Banking
Many small business owners are turning to online banks to benefit from higher interest rates, fewer fees, and budgeting help. The 24/7 customer service doesn’t hurt, either.
Online banks save your company money because they don’t operate traditional brick-and-mortar branches, so they are able to those savings along to their customers. Nerdwallet suggests using Simple, which has a “Safe-to-Spend” feature that factors in your available balance, upcoming bills, and savings goals so you can make a more informed decision before making a purchase. Payment Depot can help merchants cut costs by eliminating credit card processing fees on the sales floor, and Quickbooks can give you a quick overview of your company’s income and expenditures.
Keep a separate bank account for your business to make taxes easier at the end of the year by eliminating the need to categorize expenses. Since you can have more than one bank account, you can also reap the benefits of low-cost online banking in addition to the face-to-face support offered by physical banks by using different accounts for your business and personal banking needs.
#4. Consider Switching Banks
Switching banks can be a daunting task, but it can help your company save money in the long run. Choosing your new bank is the most important part of the process, so you want to make sure you consider the bank’s location in proximity to your physical store or office, interest rates, monthly account and overdraft fees, and the availability of the bank’s customer service team before you make a final decision.
Once you’ve determined the right bank for you, the first (and probably most time-consuming) step is to inventory all of your bills and automatic payments. Take some time and systematically review all of your company’s expenses, since it’s easy to miss recurrent charges like your heating bill on charges on irregular payment cycles, such as paying out your contractors.
When you open your new account, close your old account in person to make sure you can look over the fine print and ask questions, but also keep a reasonable chunk of money in the old account in case you missed any regular expenses– after all, the last thing you need is for a check or payment be declined when you’re trying to get your company’s finances on-point.
#5. Better Budgeting
Creating a business budget isn’t just necessary to keep track of how much money is coming in and going out at your company, it is also essential to have a mapped-out game plan if you want to apply for a loan to scale your company.
Tim Herrera at New York Times got it right when he said budgets are like diets, “The best one is the one you’ll stick with.” Since many business owners simply don’t have the time to allot to creating and maintaining a business budget, it is always a good idea to work with an accountant you can trust, who – in addition to helping you gain a full-picture view of your company’s finances – may also may be able to illuminate where your business can cut costs through smarter financial planning.
Most of us have room for improvement when it comes to managing our company’s revenue. Determine whether you’re paying unnecessary fees and whether you can cut costs, such as credit card processing fees, through strategic partnerships. Shop around, new ways build your business are emerging all the time and you’ll be amazed at how much working with the right financial solution providers can help build your business.