In today’s turbulent market conditions, businesses need to be hyper aware of their expenses and focus on profitability. Many experts predict a recession is looming and inflation continues to be an issue in the U.S, with the Consumer Price Index (CPI) increasing 8.3% in April.
Despite this bleak outlook, businesses can stay ahead by taking steps to cut costs proactively and conserve their capital. Here are 5 practical ways to do just that.
1. Get a business credit card that offers cashback instead of points
In a recession, you want to optimize savings. One lever that often gets overlooked is your business credit card. If you're using a card that pushes points, you're incentivizing employees to spend, not save. These cards offer tantalizing rewards to motivate you to spend in certain areas, like travel. Unfortunately these points can be difficult to redeem, which means you’re left with an arbitrary number of points or miles that you may or may not be able to put toward the hotel room on your next business trip.
For most companies, business credit cards offering straightforward cashback are a better choice. Based on our analysis of more than a thousand credit card statements, companies earn 19% more on average when they use cashback instead of points.
Pro tip: Get unlimited 1.5% cashback with Ramp → On top of the cashback, you get access to more than $350,000 in partner rewards from companies like QuickBooks, Amazon Web Services, and Slack.
2. Use card controls to block unapproved expenses
Speaking of credit cards, check if the one you're using provides spend management tools. The best cards come with software that automates compliance with your expense policy because, let's face it, your employees won't always remember what's allowable. Some companies resort to making employees spend out of pocket and submit expense reports, but that's not efficient.
The best way to ensure responsible spending is to issue cards with preset limits to your employees when needs come up. For instance, give your marketing team a card that is restricted to the ad vendors they work with and blocks all other transactions. Good software can help you manage this.
Pro tip: Ramp provides free, easy-to-use software that lets you specify how much employees can spend on their cards and the categories and merchants that they can spend on. Control your business spending with Ramp →
3. Root out unnecessary expenses
Even legitimate expenses can quickly spiral out of control. For example, duplicate spending (paying for the same product or service twice) can be a major problem for even the top-performing companies. You should also keep an eye out for recurring subscriptions. While they can be beneficial, it’s easy to lose track and continue paying for a service long after you’ve stopped using it.
Pro tip: These issues are easy to fix with Ramp. Ramp helps you track business expenses in real time and automatically flags issues like duplicate expenses, redundant software, and higher-than-normal spending. Check out Ramp's spend management tools →
4. Renegotiate your contract terms
Different companies can wind up paying varying amounts for the exact same product. That’s because some negotiate the terms while others just pay the price they’re quoted. Don’t fall into this trap.
Start by reviewing which vendors and features you absolutely need. Research pricing benchmarks by finding out what others have paid for the same vendor. Oftentimes companies don’t like this info published, so you might need to look on online forums or ask your peers in the industry. Once you’re equipped with this information, reach out to the vendor and use your data to explain why you’re looking to lower the cost of your contract.
When negotiating your contract terms, aim for net 30- or 45-day payments instead of terms that stipulate payment is due upon receipt. Make sure to align your cash flow schedule with payment dates if you’re paying by credit card. Check out more tips to help you negotiate a fair price.
Pro tip: Ramp can help you analyze your contracts and identify areas where you might be overpaying. Our procurement experts can even reach out to your vendor and negotiate your contract on your behalf to save you time. On average, we've saved Ramp customers 27% on their biggest contracts. Get free pricing benchmarks from Ramp →
5. Cut payment processing fees
Some vendors charge a processing fee when you pay your bill by credit card. It may be a small amount, but according to Wolfe Research, bill payments represent 75% of discretionary company spend on average. So these processing fees can quickly add up.
If a vendor charges a processing fee, pay by ACH or check instead. It's best to use invoice processing software for these payments to help you avoid common manual errors, like paying the wrong merchant or amount.
Pro tip: Ramp comes with bill pay software that helps you pay your bills by card, ACH, or check. It'll automatically confirm vendor payment details, route bills for approval, and detect duplicate invoices so you don't have to worry about making costly manual mistakes. Try Ramp Bill Pay today →
Good spending practices will help your business endure
Some cost-cutting measures require you to make difficult trade-offs. Others just make sense, whether we're in a recession or a season of economic growth. Ramp offers next-gen finance tools to help you transform your business practices and build a lasting company.