The end of the year is a good time to review your small business expenses and assess how you may be able to tighten up the budget by reducing some costs going forward. Looking at ways to cut business expenses is especially timely given the COVID-19 pandemic and the impact it has had on businesses both large and small. Right now, it seems that all small business owners need to be finding ways to get lean in order to survive in this environment. The key is controlling expenditures.
At CE Thorn CPA PLLC, we can review your financial statements and provide insights on important details like your profit margin and receivables outstanding, helping you determine where expenses might be reduced. We’ve put together some areas where you can reduce costs and cut business expenses as we finish 2020 and go into 2021.
Reviewing your office space needs is always important but especially right now. The pandemic has created an environment where many employee roles, if not necessary to be in an office, are being performed from home. You may be looking at whether long-term these employees need to come back to an office after the pandemic. Maybe working from home will be the “new normal.” Maybe you could have had workers work off premise before but just didn’t think about it. Can you run your business from home or mobile? If you have a service business where you go to your customers, you may be able to transition to a home-based business.
If you determine that you do need a commercial office, you should look at taking advantage of possible depressed rent prices and move to a less expensive space or negotiate better lease terms with your current landlord.
You can save money on office supplies. Contact your current vendors to let them know you are price shopping. Large discount suppliers like Sam’s Club, BJ’s, Amazon, and Wal-Mart may be able to come in with lower prices than the suppliers you have today. In other words, shop around.
If your business makes a lot of wholesale supply purchases, you should periodically shop for the best deals. Constantly monitor supply costs by checking for discounts and looking for alternative sources. If you have a history of paying your bills promptly, suppliers may be more likely to give you discounts. Late payment fees and credit card charge can add up to unnecessary expenses that weigh on your bottom line.
You can also look for other businesses that you can go in with to pool resources in order to save money on supplies and goods.
Evaluate your insurance policies and financial accounts for places to save money. Compare providers for the most competitive rate and then ask your current lender or insurance provider to match that rate. Consolidate insurance policies or bank accounts, if possible. Review your insurance policies to make sure you aren’t over-insured or duplicating coverage.
Above all, don’t take on unnecessary debt if possible. Do a complete cost-benefit analysis and future forecasting when considering a business expansion. Look at the opportunity costs and the effect of debt payments on cash flow. An experienced CPA like CE Thorn can help with this.
Minimizing your tax bill can be one of the most beneficial ways to improve your business bottom line. This means you need to maximize all of the available business deductions to reduce your tax liability. Keep track of your business expenses by saving receipts and recording vehicle mileage when you are traveling for business purposes.
When reviewing your marketing and advertising, look at what is giving you a higher return on your investment. And, then look at opportunities to market that are lower in costs. So many businesses are using technology with social media. However, these may not be effective and lower cost for your type of business.. There are other forms of marketing that equate to word-of-mouth that are very effective and may apply for your business. Here are a few:
Managing human resources is a challenging aspect of running a small business. Considering whether to hire an employee as W-2 or 1099 is a decision that can affect your bottom line. There are advantages and disadvantages to hiring permanent employees and independent contractors. You have more involvement in paying taxes and benefits with a W-2 employee. Independent contractors on 1099s can help you cut back on costs and legal responsibilities. A small business CPA can help you determine which may be the better solution for your business.
A CPA who specializes in small businesses and has experience in guiding them to reduce costs in order to achieve higher profits can be invaluable. An accountant can provide in-depth reports that give detailed information and actionable insights so you know where your business stands.
At CE Thorn CPA PLLC, our monthly financial statements include insights on your profit margins, debt-to-equity ratio, outstanding receivables, and more. Detailed financial statements also let you know where you should invest your time and money and ways you can save money. If you’re paying too much for materials, supplies, or services, an accountant can help you find and reduce these costs.
A small business accountant can do a lot in helping you pinpoint areas where you may be able to cut expenses and reduce costs. At CE Thorn, we work with small business owners in the Raleigh area to ensure they’re taking the right steps to maximize profits.
Contact our small business accounting team by calling us at (919) 420-0092 or complete our contact form to get started today!