Reducing the costs of running a business is key to increasing your bottom line. However, not many entrepreneurs pay attention to fees associated with financial transactions. Think of payment processing fees, loan fees, business banking fees such as account maintenance fees, minimum balance fees, and the like. While these fees might seem insignificant compared to other costs, they can quickly surge and take a big chunk of your profits as your business grows. It is only prudent to know how to keep the fees at a minimum. This article explores various strategies and techniques that you can use to manage fees efficiently and reduce them to save money.

Understand the different fees.

Your first step to managing financial transaction fees is to understand the fees that you are paying for every transaction. Payment processing comes in different pricing models, such as flat rate, tiered pricing, and interchange plus pricing. Each comes with its own fees and affects the cost you pay differently. Similarly, bank loans come with fixed interest and variable interest. Choosing either or a mix of both has different implications on repayment costs.

If you are to manage fees effectively, research how each option affects the fees that you are going to pay. This can help you determine which fees to avoid, where to negotiate, and the options that fit your business the best.

Use tools to your advantage.

Photo by Mikhail Nilov:- https://www.pexels.com/photo/an-accountant-using-a-calculator-8297351/

Find different tools that are designed to help you reduce and manage fees and use them to your advantage. One example is an Address Verification System (AVS). This is a tool used to verify the billing address for your customers with their card issuer. Verifying the address helps fight fraud, and various processors appreciate the effort through different incentives.

For instance, you get a lower interchange rate from Visa for using AVS. Moreover, you lower the fees further by capturing more customer data during transactions. In addition to basic information, make sure to capture more data such as your Tax ID, commodity code, and invoice number, to enjoy a lower interchange rate.

Another great tool that you can leverage is the online Square cost calculator. If you use Square to process payments, calculating fees manually can be quite complicated. Using the online calculator helps you calculate fees accurately to avoid losing money. It also saves you time that you can refocus on other aspects of your business.

Swipe rather than key in manually.

Online and over-the-phone payments have become common as more people prefer to shop online. However, the interchange rate is higher as compared to swiping the card. While they can’t be avoided entirely, it can benefit you to encourage your customers to pay in person rather than keying in their card information manually. Face-to-face transactions tend to be safer and can be hard to dispute. Besides providing more protection to merchants, they attract a lower interchange rate.

Do banking online 

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When it comes to reducing charges associated with running a business bank account, conducting transactions online can save you money on fees significantly. For starters, making online payments saves you from ATM, check, and debit card transaction costs. Another advantage of online banking is that you can access your bank balance in real time. This helps avoid overdraft charges as you are sure of the current balance before writing checks.

In addition to online banking, request your bank for email statements if they are allowed in your country for tax purposes. This eliminates the costs that banks charge for printing and shipping paper statements.

Avoid unnecessary costs

Financial transactions can easily attract unnecessary costs due to ignorance or lack of knowledge. For instance, processors require businesses to comply with the Payment Card Industry (PCI) Data Security Standard. Failure to comply attracts a non-compliance fee every month. This is a fee that you can avoid by ensuring PCI compliance in your business. Besides avoiding the extra fee, you reduce the risk of cyber threats and credit card data breaches.

You can also avoid some costs when taking a business loan. Loans come with different features that attract different charges. Before signing on the dotted line, ask yourself if all the features included add any value to your business. Make sure to stick to the ones that you really need to reduce costs.

Conclusion

Fees associated with financial transactions might not bother you when you only have a few transactions. However, they can become significant as the transactions increase. Implementing the various techniques discussed above can go a long way in helping you keep the fees at a minimum for increased profits.