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A Penny Saved

A Penny Saved
by William Hamilton

Like an old photograph aged by time but not completely worn-out, the image of my grandfather is somewhat hazy in my mind's eye yet clearly discernible. My memory of him lingers as testament to his intelligence, logic and wisdom--often reflected by the old-as-time truisms he seemed to favor.

One such hackneyed expression has particular business relevance: "A penny saved is a penny earned." Embracing this unequivocal concept not only contributes to the success of the fledgling owner of a lemonade stand but to the prosperity of those who launch all types of enterprises. Indeed, sustained, consistent and ongoing focus on operational costs (with an emphasis on savings) will pave the way towards your business' increased efficiency, effectiveness and, of course, revenues.

One need not possess a Masters from the Wharton School of Business to exercise a high degree of proficiency in expense management. The same lessons that were inculcated to us as children may be applied here: a) Compare and shop -- Patronize those companies who offer the lowest rates for insurance premiums, telephone usage, office supplies, etc. as long as the products/services provided are comparable to their competitors; b) Conserve electricity -- Turn off the lights, computer, copy machine, et. al. when the day's (and/or night's) work is finished; c) Reduce needless waste -- Yes, permission is granted for using both sides of the paper and resorting to "white out" to correct a minor flaw rather than discarding the item; d) Leave well enough alone -- Analogous to the saying, "If it's not broke ... don't fix it." Your tried, true and dependable computer, for example, may need not be replaced by the next and best model; and e) Stand on your own two feet -- By all means, collect as much information about systemizing your business from a variety of sources (newsletters, journals, books and information gleaned on the internet). However, if possible, avoid large consulting fees especially when just launching your venture. The successful running of your business may still largely depend on your own capable hands, incisive mind and intuitive heart.

The aforementioned suggestions on streamlining spending represents a mere ripple in the vast compendium of business cost-savings tips. (The reader may access a host of such strategies from countless materials.) Rather than focusing attention on rather common expenditure-reduction ideas, it seems imperative to now highlight an often over-looked principle: the way a company collects money may be an integral factor in how much money that company collects. By devising an advantageous accounts-receivable system, a business paves the way for favorable cash flow.

One cannot underestimate how crucial cash flow is to a business' vitality. Indeed, one of the primary reasons any given enterprise fails may be attributed to cash flow problems where that firm's expenses outpace revenues. Future returns cannot offset present day expenditures. Thus, by maximizing revenues (without having to increase the price of product and/or service)--by instituting a method where a company collects payments in a more timely, efficient manner, cash flow becomes more favorable and concomitant business success appears more likely.

The operative question arises: "How can business owners collect money due (to them) in a cheaper, quicker and more effective way?" The company, Intellicollect, addresses this query by offering outstanding payment services, delineated at the internet web address: www.chexsite.com/members/icollect. These services may be implemented immediately and serve as a means of keeping owners' prices competitive while preserving profits--a rare combination for today's companies. The following provides a glimpse of several of the exciting services:

'Checks by Phone' - As the name suggests, this service describes the process where payment is secured via the telephone upon the customer's authorization. This method has a distinct advantage over credit card processing: tremendous cost savings (as high discount/transaction fees do not exist.) Consider the scenario where a $200 sale has been finalized. Utilizing a credit card with a 1.75% interest rate (a figure which is low), you must forgo $ 3.50 in conjunction with a typical $.25 transaction fee or $3.75 in total. Accepting checks by phone for a nominal fee (say a $1.00) results in a savings of $2.75 per transaction--an amount that soon adds up with cumulative sales. In addition, the owner receives his/her money within 48 hours of processing (just as quick as credit card processing).

Another advantage to a "Checks by Phone" system is that it increases an owner's potential pool of clients. People with active checking accounts greatly outnumber those who posses major credit cards. Ordering via phone is ideal for those who do not have credit card capabilities.

On-line Electronic Checks - Here, an owner may easily accept and process electronic check payments directly from his/her website if one exists. The interface (which may be added with relative ease to the website) is designed to resemble a regular check, so customers will like the easy-to-understand familiarity of this payment option. It takes less than two days for the funds to be transferred to the merchant's account--a much shorter duration than a paper check. Again, credit card expenditures are avoided as the potential number of clients increase.

In conjunction with experiencing a reduction in processing fees and improved cash flow, another advantage to on-line electronic checks is that it captures "impulse" purchases. Indeed, it is easier for prospective customers to quickly fill out the information on-line rather than mailing and sending a check. In addition, NSF check-related problems are greatly reduced. With an electronic system, your bank is bypassed as the original point of deposit; consequently, Intellicollect handles NSF items on behalf of the business, eliminating associated fees. As a final bonus, the owner can access online "real time" reporting on the status of all internet checks.

Automated payments -- Intellicollect has the software to produce bank drafts for customers who expect to receive payments on a recurring and/or nonrecurring basis. Paper drafts are delivered to the merchant on their due date. For larger clients, payments may be processed through the ACH system. Owners need no longer worry about late payments and unnecessary time and labor costs. Moreover, customers who are ambivalent about paying a high priced ticket item at one time may now opt to buy as they can pay a portion each month.

Electronic check conversion -- Intellicollect offers machines that handle paper checks in much the same manner as credit cards. A check is scanned and, similarly to a credit card, is converted to an electronic item at the point of sale. Within 48 hours of the sale, funds are directly withdrawn from the customer's account and deposited automatically into the merchant's account. This machine, equipped with verification (to ensure that a potential customer is not listed on a negative database of individuals who have previously bounced checks) and auto-collect (a feature which electronically collects that "falls through the loop" NSF check) should inspire business owners to accept checks electronically, decreasing paperwork and their time awaiting payment. (Research indicates that about 18 billion checks are written at the point-of-sale every year in the United States and a business can increase i ts profit potential 30% by accepting checks.)

Free electronic check recovery -- Finally, a truly FREE service exists! At no cost to the merchant, NSF items are resubmitted electronically via the ACH network. Three attempts are made (if necessary) to collect the funds. When the funds are collected and released, the business owner receives 100% face value of the check. In the event that the funds cannot be collected electronically, the check goes through the traditional collection route. Upon successful collection, the owner again receives the total check amount--a radical policy departure from all other collection agencies.

Other services, delineated on the website, www.chexsite.com/members/icollect, may also marshal interest including "hard-to-beat" credit card discount and transaction rates.

As the reader may now easily discern, substantial profits may be obtained by knowing how to cut expenses, saving whenever and wherever possible. It seems paradoxical that by concentrating on the end result of a transaction process (i.e., the way of collecting money), one strengthens the entire business process itself (i.e., the way to cultivate business/money). A vibrant and healthy accounts receivable system saves more than pennies; indeed, it just may save the enterprise!

William Hamilton

About the Author

William Hamilton served for six years in the United States Air Force division, providing a foundation for strict adherence to a code of discipline, ethics and integrity--important underpinnings for a successful personal and professional life. Since leaving the military, he has launched several thriving businesses, particularly an installation company he still heads today. In the interests of full disclosure, Mr. Hamilton also co-owns the company mentioned in the article, Intellicollect. He anticipates that this payment company can offer tremendous assistance to new and veteran business owners alike. For information about Intellicollect's services, please call (973) 390-0852 or email: intellicollect@worldnet.att.net

Tags: Money Matters



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