Managing your business costs to cap them within an acceptable limit provides many benefits to your business. However, managing business costs, especially recurring business expenses, is often demanding. Despite the challenges, finding ways to effectively manage business expenses remains essential.
The first step in cost control is to clarify the different cost centers and their contribution to the bottom line. This activity can highlight unnecessary functions and costs while exposing waste in some of your company’s most essential services.
Financial technologies such as virtual payment cards can help pave the way for effective management of business expenses. However, anchoring their use in a solid cost control strategy significantly reduces costs and improves profitability.
Here are some tips to help you control your business expenses.
Businesses incur both fixed and variable expenses. Fixed costs are those expenses that remain the same regardless of production volumes, while variable costs vary with production volumes and other business activities. Fixed costs include rent and interest income, while variable costs include transaction fees, commissions, materials, and utilities.
Controlling your company’s costs starts with breaking down your various costs and analyzing them from the largest to the smallest.
Understand your business processes
Even if a team works for you, it is essential to fully understand all the processes involved in the production of your goods and services. Analyzing your company’s internal and external processes is a time-consuming but necessary exercise in controlling costs. The results here can reveal gaps that are bleeding your financial resources.
Renegotiate the terms of the contract
In some cases, the best way to control costs is to renegotiate various terms with creditors. If your business is a heavy user of physical inputs, it is worth investigating other suppliers of similar products. This activity may expose significant price differences that necessitate requesting price reductions from your regular supplier or switching to suppliers offering lower prices.
You can also seek more favorable payment terms to meet your financial obligations without negative financial consequences such as fines. Another tactic you can use here would be to outsource any non-priority business segments identified during the company valuation process. Outsourcing low-priority activities can improve your business efficiency and save you money.
Many technology products and services, including virtual payment cards, improve the efficiency of business operations through high speeds and lower costs. Consider acquiring various technological innovations that increase efficiency and profitability.
Virtual payment cards are one way fintech can help you manage business expenses.
Below, we briefly highlight the different ways virtual payment cards help you manage your spending.
1. Rreduces manual processes and lowers payment costs
Virtual payment cards eliminate the need for expensive paper checks to make supplier payments. It is estimated that it costs an average business $5.95 to complete the process of paying a supplier using a paper check. Additionally, manual processes, such as processing paper checks, are prone to human error and increase the likelihood of internal fraud.
Virtual cards reduce your costs and the risk of human error.
2. More control over your business payments
Since virtual cards are issued for specific vendors and with predefined amounts, they allow you to limit the extent of your company’s expenses over a given period. This further eliminates opportunities for underhanded dealings by some employees.
Virtual cards also allow you to categorize cost centers and reallocate finances to departments whose activities result in faster ROI (return on investment).
3. More transaction details and easier reconciliations
Virtual payment cards place no limits on the characters used to record details, giving you and team members the latitude to provide detailed information for each transaction. These details, captured in real time, help streamline your reconciliation processes and reduce manual labor costs.
4. Eliminate unnecessary transaction fees
The temporary nature of virtual payment cards eliminates various costs associated with physical credit cards, such as replacement and renewal fees. Virtual cards also eliminate monthly fees charged on physical cards.
Your cost control efforts can be undermined by cybercriminals and credit card fraudsters who have access to your banking information. Virtual cards offer increased security against attacks due to their temporary nature and the fact that you don’t need to share sensitive banking information during payments. They reinforce your cost control measures.
Controlling and reducing your business costs can be difficult. However, your long-term sustainability is only possible with strong cost control practices. Leveraging technology products like virtual payment cards can make it easier to revise spending habits on the go and implement cost-cutting measures on the go. Managing your company’s expenses allows you to be more efficient with your resources, improving the bottom line.