Business Expenses Out of Control? 6 Ways to Reduce Them
You set up spending policies. You require approvals on expenditures. You budget carefully, and do your best to adhere to its goals. But you’re still spending too much. Cash flow is tilting in the wrong direction too often. There are always ways to cut more business expenses and costs, even if you think you’re being frugal. So try cutting your business expenses and see how your bottom line looks a few months down the road.
Look at your energy efficiency.
Going green may cost a little more at the outset, but it will eventually save money. And there are energy tax credits that you can claim, which will reduce your business expenses even further.
Outsource/hire experts when you can.
Some jobs require specified hours in a specified location. But you may have the freedom to hire independent contractors for some positions.
There’s a distinct difference between an independent contractor and a telecommuter. The latter is usually considered a W-2 employee, which means that you as the employer must pay his or her Social Security and Medicare taxes, as well as any other benefits you offer other individuals who work for you. Independent contractors – or freelancers – operate as their own businesses, at least part time. They’re subject to the Self-Employment Tax, and you have no tax-related obligation to them except to supply them with a Form 1099 around the same time you’re preparing W-2s for employees.
Mobile technology and the internet have made this employment option a viable possibility in some cases. Consider first your confidence in any candidates for such positions, but keep in mind all that you’ll save in office space and equipment, taxes and benefits, etc.
Manage inventory more efficiently.
As you well know, it costs a lot of money to produce or purchase items to sell. Here again, you simply can’t manage inventory-tracking without using a small business accounting application.
Cloud-based accounting applications can give you real-time, comprehensive information about your company’s inventory.
If you have a handful of items in small enough quantities that you can store them in a closet, you don’t necessarily need inventory-tracking, since you can assess your stock with a glance. But if you sell many different types of items in large enough quantities, you’ll need the help of your financial advisor and an accounting solution.
The best cloud-based accounting applications do more than just count. They help you determine what to order (and in what kind of quantities) so that you’re neither losing money on stale, unpopular stock nor constantly running out of popular items.
Enact policies for travel expenses.
Many companies struggle mightily with this. Given the IRS’ restrictions on how much you can claim of your travel, meal and entertainment expenses, it’s critical that your road warriors are aware of both the tax ramifications of their out-of-town spending and the policies that you have instituted (or will). Employees who travel need limits, and they need to understand the importance of IRS-acceptable documentation for expenses.
There are cloud-based apps that automate the process of creating, approving, and reporting on expense reports. Ask your tax advisor.
Cut tax obligations.
This goes without saying. If you’re not working with a professional on tax planning and preparation, you may well be spending more on taxes than you need to. So, enlist the support of a tax advisor. (Find a Block Advisors office near you.)
Even if – or, rather, especially if – you’re struggling to increase or just maintain your company’s revenue, being smart about expenses will improve your cash flow.