Essential Tips For Reducing Variable Costs in your Business
When you’re working in your business, it doesn’t always remain predictable and steady. You might get hit by unexpected costs like damaged vehicles and equipment, or even unscheduled electricity bills. Variable costs, from high power bills in the summer to fluctuating prices of raw materials, can regularly pop up, threatening the unprepared business!
Therefore to make things easier for you, in this Adesh Chaurasia latest news, we’ll be discussing some of the effective ways for reducing your variable expenses.
- Average Variable Costs Out Over Timespans
It’s a common assumption that your expenses are going to be all over the place. Some months will be higher, some will be lower, right? This is true for things like the electricity bill or maybe office rent. However, you can actually smooth out certain large expenses by doing what statisticians call averaging your data. You don’t need to average it with every cost (that would be a huge pain), just choose two contrasting points: one very high and one very low. Then, you can use those for the buffer in your budget. For instance, you see, electricity bills don’t always fluctuate randomly. They stay pretty consistent from month to month, except during times when there’s a lot of activity or during summer! So, that means we can literally average out these variable costs, putting ourselves in a nice credible position for the months when things get hectic.
- Be Wary of Cost-Per-Click (CPC) Advertising
Although many people will argue otherwise, cost-per-click (CPC) advertising can have its place in business. It is generally best to proceed cautiously with it though—otherwise, total costs and a company’s net income can suffer rapid adverse effects. While cost-per-click advertising can be effective in some situations, it’s important to keep a close eye on keyword bid costs. Otherwise, you could get burned by rising CPCs faster than you might think. Fortunately, there are several ways to mitigate the risk. Google allows businesses to set maximum bids on particular keywords, so this is considered the best practice for CPC campaigns. Also, businesses can look for less competitive and longer-tail keyword phrases to lower their expenses!
- Regularly Review Product and Service Providers
Honorable suppliers are loyal to you. They respond to your needs and give you better pricing when they can. They don’t want to lose your business or theirs. You already know that, right? Great. However, while most suppliers are loyal, some of them might have other intentions and can abruptly increase the prices of their goods to earn a hefty profit. In such cases, your accounts payable software can also highlight any outliers who threaten your gateway of trust with your suppliers. This is one way to see if there’s fraud out there lurking in the shadows, or whether a vendor has decided your capricious pricing model isn’t working in his favor anymore. Make sure your bills are all in line with an AP automation software that provides real-time reviews of your payments, supplier invoices, and payment terms. This way you can use AP automation software to determine if your suppliers are cheating you or not!
- Use Virtual or Ghost Payment Cards
If you love paying business expenses with individualized cards, you might love ghost cards. They allow businesses to pay vendors and suppliers with electronically generated credit cards, providing not just the security of traditional payment methods, but also the variable cost monitoring capabilities that come only from virtual cards. These types of cards with electronic dashboards can help you combat variable spending at the source. Virtual or ghost payment (VOP) cards are an emerging form of payment that’s quickly gaining popularity thanks to their ease of use, built-in controls, and convenient dashboards. In fact, according to a report from Vantis Research, 4% of the country’s companies prefer to pay their suppliers with virtual credit card transactions in 2021.
No matter how well you plan, sometimes the unexpected happens. Your business might experience a fluctuating income or may see its revenue fall by 5% in a single month — and that puts your healthy profit margin in jeopardy. Attempting to deal with these kinds of variables on your own is not an option for many businesses because it means taking on debt and/or dipping into savings. In this Adesh chaurasia latest news, we’ve focused on how businesses can control and lower their variable expenses. Even if you don’t have many variable expenses now, you might have some later on when you scale your business; so it’s always a good idea to be prepared beforehand!
Author- Adesh Chaurasia
A superior and highly experienced entrepreneur in the field of business for quite a long time now. Also, a philanthropist, author, and public speaker who believes in working towards the overall well-being and betterment of society as a whole