Ever wondered how the best finance leaders operate? We certainly have. That’s why we’ve collated the best advice from global scale-up companies like Propeller Aero, Airwallex, LegalVision, Car Next Door, and Nutromics to see how you can optimise your cost structure.
Alex Millar, CPA
March 11, 2021
Ever wondered how the best CFOs operate? We certainly have. That's why we've collated the best advice from finance leaders across global scale-up companies like Propeller Aero, Airwallex, LegalVision, and Nutromics. Here are 15 CFO recommendations to reduce costs in 2022.
1. Review and reduce your foreign currency costs
Review the foreign exchange fees on your SaaS subscriptions. Hudled data from $30 million worth of SaaS transactions showed that 17.9% of subscriptions are charged in a foreign currency. Depending on your provider, startups could be paying 1-5% of FX fees. Over time, these add up to high costs.
If you're paying A$200,000 for Amazon Web Services, you could expect to pay about A$6,000-A$10,000 in FX fees on a domestic bank credit card. OFX charges 0.6%-2% and a flat fee on transactions under A$10,000, which is $1,200-$4,000 in FX fees. Wise charges 0.44% in FX fees, which is approximately A$876 in FX fees.
Next time you review your SaaS costs, be aware of foreign currency. Review how FX fees impact the cost of your SaaS subscriptions and consider switching to a lower-cost provider. This SaaS optimization strategy will reduce costs and help you save thousands.
"Using services like Airwallex and Transferwise are a great way to save money on your foreign transfers. We saved over A$10k when sending money overseas from our most recent production run" Dan W - Financial Controller at Propeller Aero
2. Centrally track and manage your SaaS subscriptions
Any startup needs to be aware of its SaaS costs. Centrally tracking and managing your SaaS subscriptions will help identify how much you're spending on any given tool. If you're strapped for time, consider adopting a SaaS management tool like Hudled. Our SaaS intelligence platform provides automated savings detection, immediate visibility into every tool, and data-backed recommendations designed to help you save as you scale.
3. Manage each SaaS subscription on a dedicated virtual credit card
Gain control of what SaaS subscriptions your company is paying for by creating dedicated virtual cards for each SaaS tool. This usually comes at no extra cost and is a great way to track expenses in your SaaS stack. If you lose the credentials or access, you can cancel the individual card and stop paying for the SaaS subscription immediately. This avoids sunk costs and is a great SaaS optimization strategy.
"We've taken our SaaS management to another level by creating a dedicated virtual card for each major subscription. This allows our finance team to cancel unwanted subscriptions by cancelling the card in just a few clicks" Scott M - Finance Director at Airwallex
4. Upgrade to annual plans on your core SaaS subscriptions
Many SaaS subscriptions offer 10-50% discounts if you lock into a single or multi-year contract. Determine the core SaaS subscriptions within your company and upgrade them to annual plans. This SaaS optimization strategy will reduce costs and help you save as you scale.
5. Periodically check license utilization for your largest SaaS subscriptions
Many SaaS subscriptions charge extra based on multiple criteria such as seats, "premium features", or the number of contacts. Periodically review your SaaS usage, user seats, and add-ons to eliminate redundant costs. For example, HubSpot charges approximately A$500 for 2,000 additional marketing contacts. You can save money by removing unnecessary accounts (e.g. support@[company].com, johnsmithtest@[company].com). This SaaS optimization strategy reduces your costs while ensuring you can continue using the tool.
6. Reduce or eliminate your bank fees
There are many strategies for reducing or eliminating bank fees, so contact your account representative to discuss the best option. There's room to negotiate rates and even reduce them significantly for the right volume of transactions. Contact your business relationship manager to discuss possible options.
7. Reduce labour costs by accessing talent in regional or remote locations
The cost of hiring talent is higher in urban areas than in regional or remote locations. A financial accountant (5 years experience) could cost you A$65,000 - A$90,000 in urban areas and A$55,000 - A$80,000 in regional Australia. A financial accountant in the Philippines costs A$25,000 - A$40,000. Accessing talent in regional or remote locations could reduce your costs.
8. Review staff headcount
The first step to managing a company's talent distribution is reviewing staff headcount. Consider your talent distribution. Can an employee be upskilled to accommodate two roles? Look at your business needs and determine whether you should hire more staff or upskill someone in your team.
9. Eliminate hourly rate contractors
Hourly rates are very convenient to ramp up work whenever your business requires it, but they can remain hidden and slowly create a dent in your budget. Take the example of a senior engineer who earns A$850/day and works 5 additional hours per week. Those few extra hours could cost your business up to A$531 a week, A$2,304 a month, or A$25,488 a year. Consider eliminating hourly rate contractors to help reduce your costs.
10. Renegotiate or leave your current lease
Depending on your company's circumstances, reviewing the cost of your lease could bring many cost benefits to your company. Many factors go into deciding whether or not to renegotiate your lease or leave it. How long is left on your lease? Do you need an office at all? Can you renegotiate more favourable terms? Can you sublease your current space or share it with another company? Will your new landlord cover your break costs early to start your new lease?
11. Contact all major suppliers to extend payment terms or negotiate discounts for quicker payments.
Consider if supplier finance costs, discounts and/or insurance funding are worthwhile. For example, a vendor may offer you a 2% discount for payment within 30 days. In the current climate, and with a recession looming it may not be worth it and you’re better off paying in 45-60 days and conserving your cash.
"Cash is king in uncertain times so you need to optimise cashflows and obligations" Warwick D - Finance & Operations at Nutromics
12. Eliminate funding premiums on insurance
Does it make sense in the current climate to use funding premiums on your insurance policy? Given that the industry average is 6-9% and the interest rate is less than 1% (Jun 2022) you may be better off paying your insurance as a lump sum if you have funds in your bank account.
13. Renegotiate your debt and interest terms with your bank
Determine whether it makes financial sense to go interest-only for a while. Contact your branch manager and see if a more competitive deal is available.
14. Check your company's eligibility for an R&D Tax incentive.
Contact your accountant or R&D advisor to see if you are eligible. Companies can leverage a 43.5% R&D rebate on qualified expenses such as SaaS subscriptions, engineering teams, or product research. To track these costs effectively throughout the year, create a tag within your accounting system, e.g. 100% R&D, No R&D, Apportioned R&D and Manual Calc R&D.
15. Check your utility consumption and see if you can find lower-cost providers.
You can use expense automation tools like Expense Check to compare, find alternatives, and manage your utility costs. Look at Carbon Neutral alternatives such as Powershop. You can manage consumption with a heat-map and reduce high-cost items, e.g. electricity for refrigerators that your team isn't using can cost up to A$400 / year.
From SaaS optimization strategies to R&D tax incentives, there are plenty of ways CFOs can reduce their costs in 2022. Have we missed anything? Let us know how you found ways to save in your company!
Alex Millar, CPA
CEO & Cofounder of Hudled. A platform for finance teams in growing companies to track and optimise their software stack
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