Little adjustments to small business operations can make a big difference where it counts – the bottom line. But how can you make significant changes that impact your business’s bank account, without affecting the level of service or quality of product you provide? These cost-cutting suggestions are internal, back-end, and won’t have much effect on morale or customer experience.
Get your small business’s financial health back in check by implementing one or more of these recommendations.
11 Cost Cutting Ideas for Small Businesses
- Tax incentives. Talk with your CPA, do some research, and take advantage of applicable breaks, rebates, or deductions that impact fiscal year-end filings. Being aware and knowledgeable of the incentives that are available will aid you in making better business decisions so that you qualify come tax time. The summer months are a great time of year to set up a tax planning meeting with your CPA or business advisor so that you are prepared in time for next tax season. They could also have suggestions for you on where to cut small business costs.
- Go paperless. Embracing modern technology and converting to a virtual office environment lowers your costs with paper, ink, stamps, envelopes and stationary, files and file storage space, and usage of printers, fax, and copy machines. Your business can also experience cost savings by eliminating paper pay checks and utilizing direct deposit and/or pay cards. Last, going paperless can help you stay better organized with your financial records. By scanning, saving, and indexing PDFs of expense receipts, bank statements, and other tax records, you will have a more efficient tax preparation experience next tax season, cutting down on the time your accounting firm may bill you and therefore lowering more of your small business costs.
- Adjust pay frequency. If your in-house payroll department currently pays employees on a weekly schedule, consider switching to bi-weekly. Since time is money, this will free up resources since payroll will then only be processed 26 weeks a year, instead of all 52. This can cut down on human error with less payroll deductions or records to keep track of. If you outsource, you may even catch a break when it comes to price.
- Initiate a remote workforce. Along with a paperless office, employing a remote workforce, whether it’s full-time or starting one or two days a week, can save your business money in several different ways. For one, if employees aren’t using desks, meeting rooms, or can share desks with co-workers on alternating work schedules, you can decrease the amount of space you are leasing or consider a shared-space environment. You also can spend less money on office desks, cubicles, or even trendy office equipment such as ergonomic chairs. If you can’t get rid of the office furniture outright, and still want a modern look and image, check out second-hand furniture stores, online re-sellers, or auctions to purchase gently used sets. And last, by having fewer employees in the office each day, you can save costs on lights, electricity usage, and in-office perks such as coffee, soda, snacks, supplies, etc.
- Automate bill payments. This way, you are severely reducing your chances of late fees or human error that can result in additional costs for your company. If you also automate your A/R functions, you will save time and money by not having to mail physical invoices, statements, or payment reminders. By being automated and having bank accounts already synced, it helps you get paid faster which benefits your company’s overall cash flow.
- Implement energy-saving measures. Investigate your office expenditures for necessities such as heating, air conditioning, and electricity. By incorporating energy saving measures and educating staff about its prioritization to the company, you can adjust settings in attempt to lower these monthly bills. Even switching to efficient light bulbs and educating staff about turning off lights and computer monitors each night are small changes that, once they become habit, can add up to noticeable savings.
- Price shop. Do you know for a fact that you have the best rates on your insurance policies? How about the fees you pay for outsourcing payroll? And the company you use to rent office equipment and machinery? Begin the price shopping process for the vendors that support your business, even the cleaning crew that comes in at night, to see if you can find lower prices. If you have a relationship with a vendor and want to keep using them, see if they will match the lower prices. Other cost cutting considerations are optimizing your cell phone plan based on usage or purchasing supplies in bulk from wholesalers.
- Cut unnecessary fees. What meetings are employees not attending so association fees can be stopped? How about unread magazine subscriptions? Even if you are facing insignificant fees on your company debit, credit cards, or banking accounts, consider switching to a lower interest rate card or even a different bank that either does not have fees or is currently running a promotion for new customers.
- Freelance or outsource. Depending on your business’s circumstances and the workload, if you have an employee leaving, you might want to consider turning to a freelance website to find an independent contractor to perform their services without paying to hire, train, or provide employee benefits. You can also outsource vital business functions like payroll, accounting, information technology, marketing, or human resources, which again, saves the cost of a full-time employee.
- Ask staff. Consider introducing a suggestion box so you are made aware of areas in need of improvement. Offer a bonus or reward for whoever’s suggestion had the most cost savings. Inquire with them about any unused skills they have so you are getting the maximum productivity and efficiency right under your own roof.
- Take advantage of free apps. Productivity, timekeeping, project management, photo and document editing, receipt scanners, document and data storage… Evaluate all of the software products you are currently paying for and look into if there are any free and reliable comparable apps that can be installed to your desktop PC, smartphone, and/or tablet.
Being conscious of your company’s spending can help you know the best areas to cut small business costs. If any or all of these suggestions are implemented, make sure you are clear and timely in communicating changes to staff, especially the ones that affect them directly. It is also very important to not let any of these measures reflect poorly on customer satisfaction or experience.
Areas not to cut back on
While cost-cutting requires some restructuring in your day-to-day business operations, there are several areas that at first thought may seem reasonable to make cuts, but could potentially have a reverse effect. Here are four areas not to immediately cut costs in your small business:
- Eliminating all employee perks or implementing widespread layoffs. These are rash, abrupt changes that will negatively impact staff’s morale. Not only will you then have to spend more money on recruiting, interviewing, hiring, and training new employees, your culture and business image may never recover.
- Trading your CPA for DIY tax preparation. In some instances you get what you pay for, and quality tax advice and preparation is not really an area you want to skimp on. A CPA’s advice is an investment in your business’s success. You may think you can cut corners by purchasing DIY software, but would you DIY a surgery on yourself? CPAs have knowledge, experience, certifications, research, and CPE hours that make them qualified to know the ins and outs of the IRS tax code and ideal business performance indicators. Plus, the fees and penalties for incorrect filings, late deadlines, or having to pay a CPA to correct the software’s mistakes will cause you to face a higher bill than you would have had in the first place.
- Erasing your marketing budget. Ever hear the phrase “you have to spend money to make money?” While you can be more conservative and strategic about your marketing expenditures, it’s not recommended to eliminate the expenses completely. If your business is at a point where you need to cut costs, rejuvenating your sales by marketing to your customers and prospects could be a way to improve business. Consider utilizing modern, low-cost marketing tactics like social media, online listings, and email campaigns.
- Doing away with charitable donations. While it’s okay to cut back a bit during hard times, it’s not the best area to eliminate entirely. Especially if having a strong community image and philanthropic footprint is a part of your brand or culture, it is critical to not burn any bridges you have with community organizations. Plus, tax benefits exist for your contributions based on your circumstances, so it may actually help your year-end financial position.
If payroll processing and tax filing is taking too much time or costing too much in penalties, a cost-cutting move for your business may be to outsource to payroll experts, like Abacus Payroll. Contact us today for an affordable, no-obligation quote.