Is Your Business Avoiding Critical Cost Reduction Projects?

These are unprecedented times. Fueled by a dropping unemployment rate, a surge in consumer demand and expectations of record-level government spending, the U.S. economy is rebounding faster than anticipated. In fact, according to Business Insider, the economy’s recovery from the COVID-19 pandemic is three times faster than the rebound from the Great Recession.

We probably don’t need to tell you that finance departments are busier than ever due to the dramatic shift in business practices since the days of the first pandemic lockdowns. Despite facing a staffing crunch, many CFOs, controllers and CPAs have been flooded with new responsibilities.

cost reduction project

Traditionally, when business is booming, cost reduction initiatives take a back seat to other priorities. However, your organization can’t afford to ignore these crucial projects. If you want to overtake the competition, cost reduction must be at the top of your to-do list. So how can you handle these projects effectively without adding more work to your already overburdened staff?

With 2022 budget planning underway, let’s take a step back and see how you can set up your organization for success in the post-pandemic era. We’ll look at cost reduction through the lens of optimizing credit card processing fees. Like many cost reduction initiatives, it can seem daunting and complex on the surface. But we’re here to illustrate a better approach through examples that you may not have considered.

The pandemic brought about many changes, especially to the way the world does business. As a result, every industry is facing challenges in adjusting to the new normal. Research and advisory company Gartner maintains that as organizations reset their business initiatives post-pandemic, CFO’s must find ways to adapt and focus on differentiation. As with the 2008 financial crisis recovery, differentiation factors allow companies to emerge from a crisis outperforming their peers.

“To pull ahead in the COVID-19 recovery and outpace the competition,
business leaders need to find ways to strategically cut costs while also
funding new growth investments.”—Gartner

Today, ensuring your business stands out relies on a cost optimization approach. “To pull ahead in the COVID-19 recovery and outpace the competition, business leaders need to find ways to strategically cut costs while also funding new growth investments,” states Gartner.   

Example: e-Commerce Surge Increases Cost of Doing Business
With the COVID e-commerce boom, businesses and consumers are using credit cards more than ever before. McKinsey & Company estimates that in 2019-2020, e-commerce growth increased by two to five times its pre-pandemic rate. Unfortunately, not every business is prepared for the higher costs of facilitating a sudden surge in credit card transactions.

On the heels of a slowing economy, organizations like Visa, MasterCard, as well as banks are looking to recoup their lost money from 2020 by increasing the fees businesses pay to take credit cards. One of these fees is called an interchange fee. If your business accepts credit card payments, you may see interchange fees increase by as much as 20%.

This is just one illustration of how businesses are seeing a significant increase in the cost of doing business. Before we tackle how to avoid or offset these increases, it’s helpful to analyze why 68% of cost reduction efforts fail.

If cost reduction is critical to success, why do some businesses avoid or delay important cost reduction projects? To find the answer, it’s essential to identify the two key ways business leaders and finance teams commonly approach cost reduction projects and acknowledge their drawbacks. 

Efforts to cut costs often fail if they are approached as blanket
reductions without realistic or well thought-out targets.

1. Cut existing costs or programs

Many companies tend to focus on this approach because cutting costs may seem comparatively easy, if for no other reason than its measurable and predictable. Beware, as Zenith Strategy explains, plenty of pitfalls make a cost reduction program difficult to get right.  

  •     These efforts often fail if they’re approached as blanket reductions without realistic or well thought-out targets. For instance, a 20% across-the-board cut would fail if several critical processes are in place or long-term contracts.
  •     There are often challenges with execution, such as misalignment of key stakeholders, poor planning, lack of internal cooperation, and inadequate ability to measure results.

2. Optimize processes and vendor relationships for lower cost

When it comes to optimizing existing processes and expenses, busy teams often take the path of least resistance by choosing to renegotiate with current vendors or sign contracts with new vendors. At best, these options can lead to difficult situations. At worst, they can be disastrous. Companies risk rushing into agreements they don’t fully understand, leaving room for future cost increases as the scope of work changes.

Example: Lack of Expertise Leads to Higher Fees
In the case of credit card processing fees, renegotiating with the processor is incredibly risky. The fees are difficult to understand and often impossible to compare and contrast between bids. As a result, accepting a seemingly beneficial deal can result in unexpectedly higher fees. There are simply too many variables at play to negotiate thoroughly.

The only way to truly solve this challenge is to approach it with deep expertise in credit card processing fees and merchant cost consulting. And depending on the area of expense, your in-house finance team may not have this expertise or the time to focus on it.

With all of this complexity, and revenues rebounding quickly, it’s no wonder that time-strapped finance teams often turn away from fundamental cost reduction initiatives. But as the post-COVID economy takes shape, it’s incredibly risky to let costs get out of hand. That’s why we’ve put together five keys to effective cost reduction:

  1.     Maintain long-term perspective rather than focus on short-term gain
  2.     Understand how critical business functions and staff will be affected by any changes
  3.     Ensure clear and firm ownership of the project
  4.     Have reasonable targets
  5.     Measure your key performance indicators

Even when all five tactics are executed correctly, there’s still one inherent problem. Cost reduction efforts may take more time than your overextended team has to spare. Luckily there’s a solution that allows your team to hand over the heavy lifting to the experts.

Frequently, business costs are tied to a more complex set of variables than one might imagine. For example, it can be almost impossible for a non-expert to decipher these variables with respect to credit card processing fees. Did you know that Visa has 800 pages of rules governing how these fees are calculated? And they’re not the only ones who have a say in the matter. Multiple entities are involved. No finance team has the time to dig through this level of nuance.

For situations like these, the best solution is to bring in seasoned experts to complete the project on your behalf—saving you time while dramatically increasing the likelihood that your efforts will take hold and remain effective long-term. As a bonus, it doesn’t have to cost you any upfront money. An increasing number of industry experts operate on a contingency or gain-share model. Meaning you won’t even be invoiced for their services until after the cost reductions have been realized. After which, their fees are only a portion of the money you are saving through their efforts.

A gain-sharing model gives you ready, simple access to experts in some of the most complicated business costs, such as freight, bank fees, telecom, and, yes, credit card processing fees.


We’re here to help position your business to thrive post-pandemic. Without any time investment, disruption, risk, or upfront fees, we can easily bring 25%-35% of your credit card processing fees back to your bottom line. Schedule a consultation today.

Verisave is a third-party cost-reduction firm specializing in merchant accounts and credit card processing fees.

Verisave is not a payment processor, and is not affiliated with any processors, card brands, or banks.

Verisave has more than 20 years of experience optimizing and monitoring the credit card processing industry.

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