For some time now, almost all businesses have had to work a lot harder to keep sales revenues from falling and stop costs rising too quickly (and therefore making profitability very difficult, if not impossible). Although some companies are clearly doing better than others, at the most simple level, they only have two broad “weapons” available to them to do better. One is to sell more and/or at a higher price. The other is to reduce their cost of selling as much as they can without adversely affecting sales or customer service. Let’s look at both of these “weapons” in a little more detail.
Selling more at a higher price
In a high demand market, or where there is product/service scarcity, this is much easier to do. However, in the current economic climate, customers often want to buy or “do” with less and purchase at lower rather than higher costs. As a result, many companies have tried to create discounts for a higher levels of purchases (trading price for volume) or have offered smaller and more flexible purchase “packages” at a higher cost (trading volume for price) but rarely both. Of course, even these individual approaches do not always work and several organisations try many other tactics to win new business or to keep a customer buying (including free product/service giveaways, discounts, costless trial use periods etc). Even more challenging is that every company is now adopting similar steps and the buying customer often benefits by simply watching and waiting for the best deal.
Reduce the cost of selling
At face value, this is a relatively straightforward approach in which we simply stop spending as much as we can or cut budgets/expenses by a fixed amount perhaps. However, all businesses have fixed costs and variable costs. Fixed costs take longer to change (like paying rent in a contract that might run for 2 to 3 years for instance). We therefore often have to wait for the right opportunity to change things in the fixed cost realm. Variable costs can be changed quickly but often mean removing or reducing those very costs which are being invested to generate sales. An obvious example here would be marketing or promotional expenses which are clearly spent to stimulate future purchases. When cutting costs, many companies consequently restrict their efforts to finding “unnecessary expense” or “cost wastage”. This may have worked when there were a few qualifying expenses around to find, but after 2-3 years of economic “squeezing”, there’s often little left to cut.
Technological Innovation comes to the rescue
So, if revenue raising and cost cutting are difficult, what else can companies do? One often overlooked area is to use technology or innovation to render the improvements you are looking for (and this does not have to mean a large-scale investment on the IT side either).
In recent years, technological innovation, as it relates to organisations both small and large, has moved extremely rapidly and has provided whole new ways to do business both more efficiently and effectively. The use of the Internet is an excellent example of this change with even the smallest enterprise now being afforded the opportunity to sell to a worldwide customer base if they so wish via a well-designed web site. And even individual customers are keeping up with the Internet revolution it seems. In 2011 it is estimated that a little under 24 million people in the UK will regularly use the Internet for business transactions. And for a high proportion of these, it is their preferred way of transacting with organisations they buy from.
With the above in mind, there is one area that every enterprise can quickly change to achieve positive benefits on both the revenue raising and cost reduction efforts side of the equation. This is using the Internet to present the organisations’ bills or invoices and to allow them to be paid by customers electronically.
In the past, the change to online billing and payment would have meant quite a large investment in both hardware and software and having to tie up valuable employee resources for months potentially (IT and other). However, if the right solution is selected this no longer needs to be the case. Full service Digital billing providers (such as PaySwyft) have already invested in the technology and are continuing to do so continually. What this means is that this technology is therefore now offered on a “pay-as-you-go” basis to organisations, which can thereby gain the benefits immediately and only pay as a small proportion of transactional income, as the online processes are used. Although this sounds like an on-cost (even if it is “pay-as-you-go”) this is not the case. By getting customers to review invoices online and paying them by electronic means, a company saves lots of individual costs, including issuing invoices (paper, ink, envelopes, stamps etc) and collecting payment (phone call handling, credit control, reminders, statements, reconciliation efforts etc). In addition, because the whole process is much faster for both the merchant and the customer, payments are often made much more quickly, thereby accelerating much needed cash flow. It is not unusual in these circumstances to see savings of 3-5% of costs saved by adopting online bill presentment and payment as well as 0.5-1.5% in revenue side benefits. Clearly this makes a big difference to the bottom line and is well worth investigating as a strategic performance improvement exercise.
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