Small businesses are the very backbone of America and the thrusting engine which powers the world’s leading economy. Indeed, there are an estimated 31 million small to medium sized enterprises currently registered in the US and they have accounted for a staggering 65% of all new jobs created since 2000.
Ask any of the 31 million small business owners and they will surely tell you that running a business is incredibly rewarding, but that it can also be seriously challenging. And never was running a business more challenging than it was in 2020 when the COVID-19 global health crisis forced many of them to close their doors and cease trading for several months with only the bare bones of support from the central government.
With margins being tighter than ever and more uncertainty to come, Mom and Pop business’ are paying more attention than ever to overheads and looking for more and more ways to cut costs. Today we’re going to take a look at 3 common ways in which businesses waste money and what you can do about it.
Here are the easiest ways small businesses can save a few bucks in 2022!
International Money Transfer Fees
International money transfers are by far the most common way in which businesses’ needlessly haemorrhage money. Whenever your business sends or receives payments from abroad using your bank, you are losing out. To understand why and how, we firstly need to take a look at how international bank payments and transfers work.
Let’s say you are paying a supplier in Europe €1000 for some goods they sent to you. You look on XE to get an idea of the prevailing currency exchange rate and see that it works out at $1129 USD. You would therefore be forgiven for thinking that the transaction will cost you $1129; but you would be very mistaken.
When you instruct your bank to handle the payment, they will change your USD balance into Euros in order to complete the transaction, but they will use an exchange rate that favours them rather than the open market rate. So although the current market exchange rate for €1000 is about $1129, the bank may use a rate (for example) that equates €1000 with $1135. They are therefore “charging” you $6 to change currencies.
And they won’t stop there. All banks also levy a transaction fee whenever they handle an international transaction. This could be a set amount (commonly these range from $2.50 – $15) or it could be a percentage of the transaction.
Finally, the recipient’s bank will also charge a transaction fee which your supplier will presumably be expecting you to pay – in the case of European banks, these commonly range from $5 to $20. So, a transaction which you thought would cost you $1129 may well cost you $1150. Problematically, banks are often quite vague about how international payments work so many business owners don’t even realise that they are being overcharged.
The way to get around this is to find ways to make international payments that bypass the banks completely and instead to look for non-bank international money transfer services. Thankfully, there are many ways you can do this such as using an international transfer specialist or opening an account with a challenger, neo-bank who generally offer much better deals than the established banking cartels do.
The fin-tech sector has really revolutionised the international transfer market and there are a lot of providers out there who can offer much better value than your bank can. In fact, there are so many that it can be overwhelming choosing the best international money transfer provider. To whittle down your options, check out this useful comparison showing the best ranking for USA visitors.
We all know that credit cards are a bit like alcohol – they seem like a great idea at the time but usually leave you saddled deep with regret. Whilst credit cards are useful, if you don’t keep on top of them then the high interest payments can easily mean you end up paying a lot more for whatever it is you buy with them than you would if you paid cash.
However, if you can manage your credit cards properly, then they can actually save you money. For example, most providers offer cash back, air miles points schemes and some even send out vouchers as a reward for using the card. The trick to using credit cards sensibly is to pay for goods with them but then make a full repayment before any interest becomes due – however, it is very easy to forget to do this which is precisely what the credit card companies are counting on.
Virtual Call Center
Outsourcing can be great for saving your business money when used effectively. For example, many businesses these days find it cheaper to outsource their payroll and online security.
However, a lot of outsourcing is actually counterproductive causing as many problems as it solves and offering very little value to businesses. One prominent example is Virtual Call Centers – whilst businesses may be tempted by the promises of “24 call handling services” and offshore workers answering phones for far below the American minimum wage, research shows that they can actually be detrimental to a business. A lot of customers just do not like them. Also, a virtual call centre does not really know or care about your business and simply cannot provide the personal touch which makes a small business special and unique.
Winter is always hard for small business and with a new COVID variant rearing its head, 2021 could be an especially stark and cold one. However, by paying close attention to cost saving measures and by simply continuing to do what they do best, even the hardest hit business can hope to weather these trying times and come out the other side stronger than ever.