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Does your invoice ever take you by surprise? With utility bills, especially those where you pay per usage, there is always a chance that the fluctuation in your usage habits or the company’s rates will result in a bill higher than you anticipated.
For businesses, it’s harder to plan around peak utility rates like you can do in your home. However, that doesn’t mean you can’t budget better, and be more prepared for your monthly invoice. In this article, we look at some of the steps you can take to budget more accurately for your business utility bills.
According to provider Constellation, the average cost of energy consumption for a commercial building is $2.14 per square foot, with lighting and HVAC systems being the most expensive consumers. Your expense will largely depend on your specific facility, industry, and location.
In order to figure out an average of what you can expect to be paying, you will have to take an inventory of your utility expenses. If you’ve been operating for less than a year, this may be a bit less accurate, as you haven’t had time to account for all seasons and rates.
No matter how long you’ve been operating, here are some steps you can follow to get a good estimate:
If you’re being proactive and trying to budget for your utilities before launching your business, you’re not going to have any data to build from quite yet. You do have some options though:
Luckily, many utilities will be able to provide you with an estimate based on your property size and industry. Contacting them for help is a great place to start.
This isn’t an exercise to do just once. Keeping up-to-date and consistent records of your utilities spend not only helps you budget better but will allow for you to identify potential billing errors that may arise or rate hikes, as well as areas for savings.
This is especially important if you ever decide to make an operational change that could impact your energy bill. Especially if you’re employing measures to reduce energy consumption, and therefore your overall bill.
As a business owner or operator, you might not have the time to be as on top of your utility bills as you’d like to be. In this case, working with a professional like a bookkeeper might be worthwhile.
Your utilities invoices may contain both fixed and variable expenses. The best way to describe the difference is that fixed expenses are costs that stay the same from month to month, whereas variable expenses are ever-changing and harder to predict.
Some utilities will charge a flat rate on top of per usage invoicing. For example, some water utilities’ services are combined to include sewage, and a flat rate will be charged for sewage while the rest of the water bill is per use. Understanding which parts of your expenses are fixed, versus which parts you have control over can help you save money.
Having a good handle on your business expenses can make a big difference for your bottom line. Utilities might seem like a mysterious invoice you receive every payment period, but budgeting for them properly is not only possible, but can help lead to other savings as well.
To some degree, almost every business relies on utilities. It’s an operational expense necessary to running a safe and functional physical location.
However, it’s also an expense that many business owners and operators don’t feel they have a lot of say over. From understanding usage and rates, to billing errors, to proper budgeting and planning, there is a lot a business can do to have greater understanding and agency in their spending.
Unfortunately, there are a lot of potential errors that could be leading to you overspending. The errors we will be looking at include:
A provider’s rates aren’t usually uniform across all kinds of customers. Usually, they’re divided between residential, commercial, and industrial. Among these classifications, there are also specialty rates for different kinds of customers, such as the elderly or different kind of economic development projects.
You don’t want to be a business paying residential rates, and you don’t want to be missing any special rates discounts you might be eligible for. Paying for your correct billing classification is important.
You don’t want to pay the price of your meter not reading your usage correctly.
This happens when meters experience installation errors, communication failures, damage, and so on. It’s very rare that meters are inspected regularly to prevent these kinds of errors or misreading. While a meter breaking isn’t super common, make sure you ask your utility provider to check up on your meter once in a while, especially if you feel something might be off.
Likewise, there can be meter reading issues that transmit the incorrect data from your location to the provider. If it’s a small error, the company might not notice, but your wallet will. If there is a discrepancy, look back and see if there was a spike in your consumption or if your bill is an inaccurate representation of what you used.
Essentially, being vigilant, reading over your own bills, and not relying on the meter to be infallible is important.
This is a particular issue for multi-location businesses. If you only have one facility, you only need to keep track of one meter. However, it becomes harder to keep meters straight the more locations and meters there are.
Unfortunately, businesses can end up footing the bill for an external location’s meter. This is an incredibly costly billing error, and one you’ll want to keep a close eye on to avoid if your business expands.
Rate changes can vary a lot, from time of day to time of year. While power meters are generally reliable, as mentioned before, they can make mistakes. It’s possible for you to be charged the wrong rate for the time of day in which you’re using your utilities.
Closely monitoring your bills or using a real time data-analytics solution to track your usage will allow you to better understand your consumption and ensuring your invoice matches.
New Brunswick Power explains, “[t]he actual voltage/current used is often too large to be registered by your meter. The meter’s registering capacity may only represent a small percentage of your actual load.”
Because of this, utilities use meter multipliers to invoice you more accurately.
“The meter multiplier is similar to a map scale in that it relates to the meter’s scaled down reading of the actual consumption.”
Sometimes, a faulty formula or mistake with a new meter can lead to an incorrect number or misplaced decimal. This could cost you a lot.
These billing errors are more common in smaller municipalities and providers. Larger providers often use automated systems with less room for error.
These are as simple as they sound. Sometimes a late fee will show up on your invoice incorrectly. This can be at a substantial cost to you, unless you call your utility company to get it sorted out.
Some businesses will apply for different tax rates than others when it comes to utilities. Regional policies and incentives can be applied to save your business considerably, but you need to know what you should be paying and be able to/hire someone to advocate for yourself.
These are just some of the possible billing errors that may be found on your utility invoices. The best thing your business can do to avoid them – and to recover any money lost to them – is be vigilant, know what you should be paying, and work with professionals who have the time and expertise you might not have.
Depending on what industry you work in, your waste removal expenses are potentially a significant burden on your bottom line. Sure, you can reduce waste — but compromising the quality of this service isn’t really an option. Finding savings is possible, but first you must understand what goes into the cost.
It may be hard to imagine the price breakdown of waste removal, when most of the process happens away from your facility.
Your bill is most likely composed of four main cost types:
Understanding your options among these four categories can go a long way in helping you reduce your bill.
Containers are the aspect of waste removal that you’re probably most familiar with, and an area where you have a fair amount of control. Commercial waste containers come in an array of sizes and are typically available for purchase or rent.
Pricing is based on the cubic yard sizing of a container. On average, a 4yd3 container costs $15 a month to rent, and $350 to purchase outright. Prices increase incrementally as size increases.
Knowing what size you need might come with trial and error. Come collection time, the optimized container is the one that is filled, but not to the brim or overflowing. Excess waste is often subject to excess fees.
Whether renting or purchasing is more effective for you is going to depend on what you need. Depending on your line of work, a permanent container might not make sense. For example, temporary construction or landscaping projects are more likely to require a rental, compared to a residential building or school.
Expert Market advises that purchasing a container is more efficient if that bin will be in use for at least 23 months.
Waste collection fees are going to be the most variant depending on your location, container size, and collection frequency. This could be as little as $30 a week, or as high as $3,000. Figuring out your needs can include some trial and error and industry research. A restaurant is likely to require more frequent collection than an office building.
The kind of waste your business generates, as well as local health codes and in-person traffic throughout your premises, is going to determine your collection frequency.
Factored into your waste removal fees are the fuel and other transportation costs of moving your waste to a landfill.
Transfer can be arranged in two ways, direct or indirect:
Based on your premises’ location, your transfer method may be out of your control. Businesses located far from landfill sites must rely on transfer stations to dispose of waste, which inevitably increases costs.
Many waste management providers have discounted rates with transfer stations and commercial landfills that are worth investigating.
Every time waste is disposed of at a landfill a landfill tipping fee is charged. On average, for commercial landfills, these range from $25-150 per ton.
As with transfer costs, many commercial waste management providers have preferential rates for customers at landfills.
Even when you’ve accounted for the four main cost categories of your waste removal bill, you may notice that there are some extra, unexpected charges on your bill. Keep these potential fees in mind when budgeting:
One way to avoid many of these charges is to evaluate the container situation on your premises and see if you can optimize the location to make it easier for haulers to collect your waste.
This information might seem overwhelming. Waste expenses can really add up. Fortunately, there are steps you can take to optimize your services and reduce your expenses.
Start by considering an internal or external audit of your waste removal system. Are your] bins being emptied too often, or not often enough? Could you be paying transport fees for a closer station or landfill? Are your prices increasing multiple times a year? Are your containers the right size for your waste output?
Ask yourself these questions and pay close attention to your waste removal bills. You might be spending more than you need to.
If you accept any kind of credit card payment, you may have heard of surcharging. It’s the practice of adding an additional charge to a customer’s purchase to cover the fees a payment processor requires for processing credit cards.
While it may seem like a win for you, the merchant, it’s not a completely problem-free practice.
In this article, we take a look at this practice. Should your business consider it? What are the pros and cons?
Every time a customer swipes their Visa, Mastercard, American Express, or other kind of credit card, you incur a processing fee. These are called interchange fees. According to Quickbooks, the following variables impact a merchant’s interchange fees:
Likewise, rates change twice a year, in April and October.
Interchange fees are just one of the many fees merchants are charged to be able to accept credit card payments.
Without surcharging, that fee lies squarely on the merchant.
If you’re looking to pass that expense onto the customer, you have two kinds of surcharging options; brand or product surcharging. Brand surcharging adds a charge every time a customer uses a card from a specific credit card provider; some merchants may add a surcharge, for example, on Visa purchases, but not Discover purchases. Surcharging on the product level, however, only adds surcharges on certain types of cards under a specific brand. Merchants may choose one option, but not both.
As you can imagine, in order to protect the consumer, surcharging is heavily regulated. In some places, it is not legal at all.
In fact, in the United States, surcharging is illegal in Connecticut, Maine, and Massachusetts. In Canada, service fees can only be added on certain kinds of transactions.
For the regions where surcharging is a legal practice, merchant are beholden to a surcharging cap. These vary by area, but often fall around 4%. The caps are put in place to prevent merchants from making profit from surcharges.
No matter where you are, if you surcharge, your business is subject to rules of disclosure. Merchants must disclose their intention to surcharge ahead of a transaction, and at multiple touchpoints while a customer is in the store. This includes such notices as a sign notifying the business’ surcharging practice at the store entrance, as well as at the point-of-sale. The surcharge dollar amount should also be clearly visible on the customer’s receipt.
While these practices keep surcharging ethical, they can also be off-putting to some customers, who only see the addition of a fee they might not completely understand.
There is no simple answer to this question. It can, but it depends on your business and your customers.
According to Evolve Payment, “[i]f your industry is a ‘race to the bottom’ where the lowest price wins, then surcharging is likely to hurt more than it helps. This is especially true in B2B industries with corporate contracts.”
For some businesses, adding fees like surcharges is going to be more common practice and expected by the customer. In other industries, it might hurt your chance of making a sale.
So your credit card processing fees are eating into your revenue, but you don’t think surcharging is the right move for your business. Not to worry – there are other things you can do to ease the expenses.
For example, instead of surcharging, many businesses offer cash discounting. In this practice, merchants discount the price of purchase if the customer pays with anything other than a credit card. And, while surcharging isn’t legal continent-wide, cash discounting is.
Cash discounting is only possible if you have a certain amount of wiggle room on your markup pricing. However, when it is an option, it certainly is a bonus for customer experience.
Another tactic is setting a minimum for credit card payments. Depending on your rates, it may not be profitable to offer credit card payments under a certain dollar amount.
Another strategy is working to reduce your overall merchant services spend. Part of this is exploring what options are available to you among multiple vendors, knowing rates are fair, and how to negotiate for the best price. A cost reduction professional who specializes in merchant services might be your best asset if you take this route.
As Evolve Payment says, “surcharging is, at the end of the day, passing business expenses onto your customers.”
While it has the potential of saving you money on your variable expenses, it’s not always a great strategy optically. Offering cash payment incentives, working to reduce your overall merchant services fees, and ensuring you’re paying the correct rates, are alternative strategies to reduce your spend while keeping customers happy
When creating a budget for your business, it is helpful to separate and account for fixed versus variable expenses. Mistaking the latter for the former can cost you, and the better you understand all your expenses, the better chance you have of optimizing them.
If you’re unfamiliar with the concept, the best way to describe the difference is that fixed expenses are costs that stay the same from month to month, whereas variable expenses are ever-changing and harder to predict.
Fixed expenses often represent the largest part of your budget. For a business, your fixed expenses are going be costs such as rent payments, insurance premiums, property taxes, and so on. While these are not easy to optimize, they are easy to work into your budget, as they are unchanging and paid at a consistent frequency.
If you can lower these expenses – say, by finding a different insurance plan that works for your needs – you automatically save more money each month or pay period.
In business budgeting, it is important to remember that all your fixed costs must be paid, regardless of your sales that pay cycle. If you’re starting a business, making sure you can cover these expenses for a period before you start bringing in revenue is crucial to staying afloat.
Your variable expenses are going to represent the costs incurred by how a given month or pay period goes for your business. How many credit cards you swipe, how much electricity you use, or how much waste you generate; all of these are going to incur a bill that varies every cycle.
Some of these expenses can be harder to reduce than others. How much heating you use to keep your office warm, for example, may be more difficult to lower than the amount of waste your organization is generating. However, in many cases, these expenses are in areas that you can strategize or work with professionals to identify savings, creating a more predictable monthly bill.
Depending on how you staff your business, your employees can be either a fixed or variable expense. Anyone hired on full time, who is guaranteed a forty-hour work week, will be a fixed expense, whereas a seasonal or part-time employee will likely be a variable expense, as their hours are subject to change month to month.
When you’re budgeting, it’s important to separate your fixed costs and your variable costs. If you’re able to determine what you absolutely will be spending in your fixed costs, then it is easier to identify and strategize areas to save with your variable costs.
Month to month, keep track of your variable expenses. Maybe one month you allotted too little to certain expenditures and went over budget. If you keep a closer eye on each cost category, you can do a better job budgeting and planning for the future going forward.
The lower you can keep your costs, fixed or variable, the better the results for your bottom line. If you don’t have experience negotiating rates or deciding what expenses are fair in comparison with the rest of the market, don’t settle. Explore your options, bring in consultants, and work with professionals who can guide you in the right direction.
Especially for the fixed expenses you will be locked into for some time, this could be a make-or-break decision for your business. Why pay more than you have to?
As businesses are racking up debt and supply chain issues are increasing material expenses, cutting costs is more important than ever. With many businesses offering online shopping as an alternative to in-store, you might find your payment processing environment has changed or become more expensive.
If this sounds like your business, here are five tips for reducing your credit card processing fees, and making the most of your revenue.
Complete monthly audits of your merchant services statements to check for billing errors and avoid rate creep. Processors usually offer seemingly standard contracts, but many contain provisions that allow them to increase your rates. This often comes with the caveat they must notify you first — but those notifications could appear in small print on one of your statements. Be sure to read your statements for notification of rate increases and periodically check your rate to see if it has mysteriously increased. Often, all it takes for them to waive the rate increase is a phone call to object.
Credit card fees are primarily based on risk. This means you’re better off swiping or inserting a card than entering the number manually. Whenever a number is entered by hand, your processor considers it a higher risk transaction and may charge a higher fee. However, not all organizations have the resources to physically swipe or insert a card. If you’re inputting the card number manually, answer as many of the processor’s questions as possible. Providing information such as the customer’s zip code, debit vs. credit, and the three-digit or four-digit code on the back of the card are all designed to lower the risk of fraud. By entering as much information as possible and lowering the risk, you’ll see reduced transaction fees!
An address verification service (AVS), is a solution that verifies the cardholder’s billing address with the card issuer. It takes your payment services a step further in preventing fraud and has been a big benefit in the world of e-commerce, including limiting chargebacks.
It works when during the checkout process, the customer enters their address, which is compared to the address on file with the issuing bank. Once the comparison is made, the issuing bank sends an AVS code to the merchant, who can then use the code to authorize or reject the transaction.
Many major card issuers, including VISA and MasterCard, support AVS.
A vendor will incur monthly fees from the Payment Card Industry (PCI) if its compliance questionnaire is not completed annually. These fees will continue to build up indefinitely until compliance forms are completed. The online questionnaire usually takes less than 30 minutes and saves hundreds of dollars every year. By completing the questionnaire, you assure your credit card processor that you are taking the proper steps to keep customer information safe and minimize the risk of fraud.
An independent merchant services consultant will find you the lowest rates possible in your area, and can also track your rates going forward to make sure you’re never paying more than you should. For example, Schooley Mitchell looks out for your best interests by providing objective advice to reduce your electronic payment processing spend and improve service.
Systematic analysis and auditing will:
Now is not the time for your business to be spending more than it needs to on credit card processing fees. In reducing costs and growing your bottom line, we hope these tips will be of aid to you.
We are ecstatic to announce that our own Marline Thomas was recently elected and sworn in as a City Council member for the City of Duluth. Her vision includes a vibrant, safe, connected, and innovative city where all can thrive. Read more about Marline’s position, here.
