RECURRING COSTS – ANNUAL REVIEW SAVES BIG
RECURRING COSTS – ANNUAL REVIEW SAVES BIG
❏ Today I’m speaking on Recurring Costs – Annual Review Saves Big Bucks. In under an hour each year, you could save yourself thousands or even tens of thousands of dollars! Check if your Financial Calendar has MRC Review. If not, you could have a big leak in your financials! I’m going to explain why you could be losing hundreds, if not tens of thousands, of dollars every year. Then you’re going to learn how quickly you can plug that big financial leak!
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Monthly Recurring Costs (MRC)
Most of have many Monthly Recurring Costs (MRC) in our businesses and personal life. For example, nearly all the software that we use is Subscription based. In the past, this was not always true. In the past, you could buy a copy of Microsoft Windows or Office and use it forever. This business model proved not to be sustainable. When a newer software version launched, many customers would not upgrade if they deemed a product to be “good enough.” Good enough mindsets sometimes led to a business dying for lack of revenue. The solution was the Software as a Service (SaaS) business model. The SaaS business model is now standard for virtually every software company.
Fire and Forget Lockup Strategy
Most subscriptions get quoted as a Monthly Use Fee. Sometimes the subscriptions can be paid annually for a discount. Typically the annual quote is “Get 12 Months for the Price of 10 Months”. This pricing method locks in a customer for 12 months by offering a discount. Often this discount is tied to a personal or corporate credit card. A component of the discount includes contractual wording that “auto-renews” the service at the “then current price” until service is canceled in advance. Its a “fire and forget” method of getting a customer using your software. Once they sign up for a year, when renewal time comes around, it just happens without the customer having to think about it. Great for the SaaS company. Not necessarily so great for the SaaS customer – you!
MRC – Expense or Capital Items
Over time, a company’s MRC can become a significant part of its budget. SaaS is often treated as an Expense and not a Capital Item on a budget. Typically Capital Items get a much closer look at the Annual Budgeting Process than Expense Items. The annual budgeting process is too deep of a subject to cover in this post but felt it essential to mention herein. You should review with your CPA if your MRC items are being correctly categorized as an Expense Item or should be listed as a Capital Item.
Recurring Costs Review Strategy
I am a firm believer in adding every MRC item to your Financial Calendar. Most business financial calendars only include a few things. IRS and state taxes, quarterly and annual budget reviews, and financial press release dates are the most common. Add the MRC Review date to it. If you haven’t done this before, start today. Later, schedule it as part of your annual budget creation process.
Start today by creating a list of all of your monthly recurring charges. Your bookkeeper should be able to pull most of this from credit card statement if you’re paying monthly. For those MRC services you’re paying annually to get a discount, your bookkeeper may need some guidance from various department heads.
Now put each item on the Calendar and mark it as a Monthly Recurring Cost or an Annual Recurring Cost. Include in the calendar event what you paid initially and what you pay now that the discount period has ended. If the difference in annual dollars is a hundred dollars or more, you may want to investigate. How does one best look at a better price? Check online for any current discounts. Call the provider and tell them the rate is too high and you need a better price, or you’ll have to investigate taking your business elsewhere. If you are non-profit, do they have a non-profit discount that you are not using? Is there a competing service that you can switch to quickly without significant retraining or disruption?
I hope I have educated you on Recurring Costs – Annual Review Saves Big Bucks. Nearly every company that I coach was not doing this practice before my suggestion. Every one of them that took some time to look at their MRC found hundreds to thousands of dollars in annual savings!
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