As entrepreneurs in 2023, the one thing we all have in common in today’s world is we all pay for software to help us run our businesses. It’s interesting to think that once upon a time we use to buy a license for the software we used, downloaded it on a floppy disc or CD, installed it on our computers, and then we returned for another license if we felt it was critical. Back then, we owned our software. Today, it’s much different.
A Subscription World
In today’s world, the software companies, many who are also our payment processing provider, have access to our bank accounts and we don’t own our software. This means they debit our bank accounts monthly for their software and/or payment systems. This has brought about a significant improvement in many cases as software companies can, sometimes, build products and services that make our lives easier and more streamlined. Software companies can build new capabilities that we need to run a better business and then push a download to us and fix the issue without us ever having to leave our office to buy one of those floppy discs.
How It Impacts Your Profits
The upsides are endless as to how this has helped consumers, entrepreneurs, and the organizations that build software to improve lives around the world. One of the potential downsides you have as an entrepreneur is the fact that these recurring costs, especially when they involve payment systems, show up every single month and the costs continue to rise. These costs not only rise in direct proportion to your revenue, but also as software and payment system organizations decide to change their fee structure to increase their profitability. This is important to your bottom-line because the combined costs associated with software and payments can easily be one of your largest expenses outside of payroll.
How To Manage Your Software Costs
One of the best ways for you to stay on top of these costs is to keep an organized list of all of your subscriptions for software and payment systems. Once you have this list, have your accountant, bookkeeper, and business advisor discuss whether the systems you’re currently using are working well, what they cost, if there’s any overlap, or if there are additional ways that would help you get the same or better results with a lower capital commitment. You essentially want to see if there are any paths for you to save money on these systems without it negatively impacting the growth or productivity in your business. You could accomplish this by finding software that could help you consolidate providers, or by working with your provider to optimize your account by removing features you don’t need, thus lowering your expenses.
Take Control Of Your Profitability
Once you’ve removed unnecessary costs and fees from your business, you want to implement a system that allows you to track your expenses for your business. This can be done in conjunction with working with your accounting system, accountant, bookkeeper, and your business advisor. This would allow you to have an easy way to monitor what is happening with certain vendors as it relates to certain fees they charge for their services. It is also a good idea to periodically check with your providers on new features they have or are planning to implement that could help you with further consolidating and integrating your systems, which should lead to increased productivity and profitability. You could establish a quarterly meeting with your advisors and doing so would help you make sure your business is moving in the right direction towards your goals.
As a business advisor my role is to work with you, your accounting team, bookkeepers, and CPA to make sure all the systems you use to run your business are working well together. If you need any help with evaluating the systems you’re using to grow your business, or are looking for ways to protect your business from software fee increases, reach out to schedule a conversation!
If you’re tired of having payment processors increase your rates when you’re not looking, download The Entrepreneurs’ Guide To Payments and learn how we consistently save business owners $10k to $20k per year without having to switch processors or charging fees to their customers.