How to Reduce Costs to Increase Your Profits

No matter how time changes or which organizational fads come and go, one thing remains true: companies continuously strive to turn a profit. To increase your profits, you have two choices: increase revenue or reduce costs. Here we discuss what effective security companies are doing to lower costs, streamline processes, and increase profit margins.

Do You Use Disparate Systems to Run Your Business?

The alarm industry has unique challenges. Many small- to medium-sized security businesses operate as authorized dealers for larger companies, which requires software solutions that meet varying business needs while allowing for the exchange of data between organizations. Independent companies also manage business processes that can end up in multiple system solutions that function separately from one another.

Many organizations typically have separate systems for:

  • Management and Billing
  • Job Scheduling
  • Invoicing and Accounts Payable
  • Customer Relationship Management
  • Alarm Monitoring
  • Workflow Management

You can’t focus on growing revenue if you have operational bottlenecks, time-intensive functions, and systems and processes that can’t scale. Streamlining procedures and running a business efficiently creates more bandwidth for your team and leads to time efficiency and cost improvements. Those things translate into greater profits. Integrating systems into one software solution as a single source of information is a no-brainer in terms of an easy win that accomplishes this goal.

Look at the Numbers

Think about it while you consider the following example. If you cut costs by 5%, your profit margin increases by the same amount, your $100,000 profit becomes $125,000, which is a 25% improvement overall. Without doing anything other than implementing a software solution that increases efficiency and cuts cost by five percent, you see immediate, tangible results.

Company A

Annual Revenue Profit Margin Net Profit
$500,000 20% $100,000
$500,000 25% $125,000

It’s easier to improve your profit margin by cutting costs as opposed to increasing revenue. To increase revenue, you must raise your prices and add new customers. Most times, there is an additional cost for customer acquisition, and the ROI is critical to the success of the effort. While increased customer acquisition is necessary, cost-cutting is largely beneficial and sometimes easier to execute. To further illustrate this point, compare the table above, displaying the result of a five percent cost savings, to the table below illustrating a $100,000 increase in revenue.

Company B

Annual Revenue Profit Margin Net Profit
$500,000 20% $100,000
$600,000 20% $120,000

Operating costs and the cost of customer acquisition can limit the impact on your net profit despite realizing a significant increase in revenue.

How Can Business Management Software Reduce Costs?

1. Reduce Average Cost Per Invoice

An autopay solution is an immediate benefit to your company, both in terms of cost per invoice and your company valuation. Creating, monitoring, and pursuing customer invoice payments is time-consuming and labor-intensive. Money can slip through, and Accounts Receivable spend excessive time pursuing balances owed. Alarm billing software with an autopay function streamlines this entire process.

If you move from manual to autopay, you could save an average of $80 per customer, per year. On top of that, the value of your customer portfolio multiple increases because your recurring monthly revenue (RMR) strengthens.

2. Reduce Payment Processing Fees

Payment processing has become a booming business in and of itself, and this is further complicated by national and global regulations requiring compliance and privacy adherence. A three percent cost to process and collect customer payments eats into your profit margin. An alarm company-specific billing tool can incorporate autopay using ACH payment processing, manage card declines, provide 24/7 payment options, and significantly reduce your payment decline rates. It also integrates with your website so that customers can access, manage and make payments on their accounts.

3. Increase and Improve Tech Visits

A typical technician call produces an industry-average of $125 in profit. If the efficiency gained from using a software solution that results in two additional technician appointments per week, you can add $13,000 to your bottom line. Using a software solution that includes scheduling, customer lookup, customer contract work orders and more, can reduce tech calls to the office.

Move to a Growth Mindset

Less time spent in operational tasks and systems means more time to strategize and grow. Work ON your business instead of IN your business. Bold Group can show you how we’ve allowed others to do this through our financial and operational management solutions such as AlarmBiller® and SedonaOffice®. Find the right solution to help you today.