Are You Spending Too Much on Business Expenses?

With cash flows being down for many small businesses due to the economy, business owners are looking for ways to save on expenses.  However, it can be difficult to know if you’re spending too much on some expenses versus others, or if you can really get a better deal.

As such, here are some tips to see if you’re spending too much on your business expenses.

Business Office Supplies

Photo by 19melissa68

Get a Budget

Take a page out of personal finance and start a budget for your business.  First, you need to make sure that you have specific details on cash outflows, and what the categories of each line of spending are for.  Once you have the categories, you can look at your data from month to month.

Then look at the categories which make up the largest percentages of your spending.  Do categories such as printing and reproduction, office supplies, or utilities seem rather high? Are you paying an accountant when you can earn your online associates degree in accounting and do your own bookkeeping?  If so, chances are you are spending too much on your expenses.

Ways to Cut Costs

Once you’ve identified your highest expense categories, it’s time to look where you can trim.  The first step is to shop around to see if you can get a better deal on the products and services you normally buy.  The internet is a great place to start.

For printing and office supplies, there are a lot of online retailers that offer these services at very low costs.  See what you’re paying, and try out a few orders through the online company.  You may be surprised at the quality you get for the price.  For regular office supplies, check on Amazon or even office supply stores like Office Depot online. Many times the online prices are more competitive than in store prices.

You can even shop for utilities such as phone service online.  If you have 0800 telephone numbers, there are several sites that let you compare your options for pricing and services for these types of phone lines.  You can also look at VoIP services to see if you can save even more money compared to your local phone company.

Is It Better to Bank With a Credit Union?

Bank

Photo by I-5 Design & Manufacture

It’s been a long time since I dumped a commercial bank for a large local credit union.  At the time, I was sick of my bank’s name changing every other year, and I hated the large fees that they charged for overdraft and falling below account balance requirements. The credit union offered low fees and a member dividend every year. Add in the friendly staff and the move seemed like a no-brainer.

It seems as though the rest of the nation might be catching on. According to the LA Times, over 1.3 million Americans switched to Credit Unions last year. The article cites factors such as Occupy Wall Street, congressional ire over debit card fee rate hikes and Bank Transfer Day which was organized by activists.

Call me anti-political, but when I start seeing political movements and agendas shape common money wisdom, I get skeptical. So, I’m rethinking credit union banking and taking a new look at which is better for consumer banking: large commercial banks or credit unions?

Banks Versus Credit Union on Costs

Are credit unions cheaper than commercial banks? With the way major banks are increasing fees it sure seems like it. However research from a Fed economist provides a more nuanced picture.

The study found that credit unions charge less in fees, but more in upfront costs. For example, commercial banks offered the best introductory APR for credit cards, averaging 8.5%, while credit unions charged 11.2%. However, late fees for credit cards were $35.84 for big banks and $18.54 for credit unions.

The same goes for depository accounts. Overdraft fees for commercial banks averaged around $22.93, while credit unions hovered at a friendlier $19.75. However, one area of difference has been in closing costs. According to CBS news, credit unions charge 2% less in closing costs for mortgages.

Banks Versus Credit Unions on Interest Paid

When it comes to paying interest; credit unions are the better choice. On average, credit unions pay .3% more in interest on certificates of deposits. While I don’t think that .3% interest will make a giant impact on income you can earn, more money is still more money.

Putting a Price on Customer Service

This is really where you are likely to see a major difference. Credit unions are owed by the members that bank at the institution, while banks are investor owned. It all adds up to a very different banking experience.

Many banks are actually looking for ways to charge for using bank tellers and customer service. However, great customer service can save you money.

When I was going through the closing process for my home, I’d indicated on my application that I wanted to use a particular title company. I worked for a banking company and received a free title search and insurance. Meanwhile, my lawyer, who I would not recommend, took it upon themselves to do the title work and jack up our bill. Our credit union caught my lawyer’s mistake immediately long before closing. They notified me and I was able to iron out the mess (and chastise my lawyer).

The lesson from my experience is that my credit union did not need to work out my title search. They had no interest in who did title and they earned no money from helping me to work out the issue. They could have simply ignored my application and allowed my lawyer to charge for the title search. However, they did take additional steps and it saved me hundreds of dollars.

Usually, poor customer service makes us angry, but doesn’t cost us money. When it comes to banking, it can mean dollars saved or earned.

Which is Better?

For most people, it’s probably a trick question.

Overall, credit unions have better customer service, savings interest rates and lower fees. However, lower fees won’t be much of an advantage for someone that doesn’t have trouble managing their accounts and meeting balance requirements. Banks offer lower overall costs, which is a noticeable advantage.

Perhaps the best answer is that they each have their strengths and weaknesses. It’s best if you pick the institution that best fits your personal needs best.

Learn How to Monetize Anything by Understanding the Value Proposition

Entrepreneurs bandy a plethora of official-sounding buzz-terms like “blue ocean strategy” and “ROIC.” If you want to monetize any goods or services, value proposition is the buzz phrase you want to get to know.

DMV lineI’m a monetization nerd. When I drive home from work, I wonder if I can I find a way to make money during my daily commute? When I’m standing in line at the DMV, can I make money during my waiting time? At the grocery store, how to make money shopping each week gets as much focus as my grocery list. When I’m doing my bills, I think about how to make money on credit card debt by cashing in on reward miles.

When I’m exercising my monetization muscles, I’m not thinking up hare-brained business schemes. I try to build solid value propositions.

What is a Value Proposition

A value proposition is no different than a marriage proposal made to a complete stranger.  The only real difference is that the proposal is pitched to a customer instead of a future spouse.

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