As a small business owner, you know your employees make a big difference for your company. You want to keep them happy, productive, and boost morale. So how do you do that? Your small business payroll isn’t the only area of your budget where you can account for employee costs. Create budgets for the things your employees want and need, like performance incentives, travel, and office supplies.
How to Budget for Employee Incentives
Giving your employees cash or other performance incentives that reward them for their work when your small business prospers is a great way to keep valuable staff members motivated and loyal. Consider implementing a budgeting plan that includes a portion of your profits set aside for rewarding employees.
The Importance of Rewarding Employees
Your employees usually know when your business does well. Sharing the profits helps keep employees dedicated to putting forth their best efforts. Most employees put in extra effort when they see that your business’s success puts additional money in their pockets. On the other hand, if you fail to share profits with your team, you basically send the message that they have no financial stake in your success or failure.
Be creative in rewarding employees, and find ways other than cash to show your appreciation. Instead, use rewards such as gift cards, office perks, or paid time off. Try to offer incentives for employees regularly rather than just once a year. More frequent rewards work better for continual motivation.
Budgeting for Incentives
How much should you budget for employee incentives? Some companies pay out incentives that equal up to 10% percent of payroll, but the average employee recognition budget sits at approximately 2%. One way to arrive at a dollar amount and timing for incentive ties employee rewards to performance. Run profit/loss reports regularly throughout the year, and when you see a significant increase in net income, reward your employees accordingly.
Even during times when profits run lower, it’s a good idea to keep recognizing employee efforts and achievements with incentives. For example, you may want to reward employees who increase efficiency in their departments or who develop outstanding advertising campaigns.
Your business can’t succeed without the work of your employees, making it important for small business owners to retain good workers. You can accomplish this goal easily by sharing the ongoing success of your business with your employees.
Budget and Save Money on Office Supplies
Seemingly small expenses such as office supplies can add up and eat into your business revenue, but employees grumble when you run out of essentials. What can you do? If you want to safeguard working capital while keeping your office functional, take a look at these tips on reducing your office supply budget:
- Replace reusable products with durable ones — it’s an initial investment but offers long-term savings.
- Do more digitally or in the cloud to cut down on paper and pens.
- Buy last year’s models of printers or other office hardware.
- Join a loyalty program for discounts at a local or chain office supply store.
- Remind employees not to take office supplies home.
- Track all expenses so you don’t miss even a small tax deduction.
- Review expenses on a regular basis to identify and cut down on waste.
Plan for Travel Expenses
Business travel can be essential for meeting clients, showcasing products in new areas, attending training sessions and seminars, and a range of other purposes for your small business, but it can also be very expensive. To ensure travel costs stay under control, there are a variety of strategies you can explore for you and your team.
To keep costs under control, map out business trips as far in advance as possible, and outline projected spending goals for each trip and for the year as a whole. You can do this on your own with a simple spreadsheet, but as your business grows and you start sending multiple employees on journeys, you may want to use a budgeting app.
Tax Deductions and Spending Goals
To ensure your business gets every possible deduction for business travel, it’s a good idea to track your expenses meticulously. Beyond this, you may want to use tax deductions and limits to help you create your travel budget.
For example, the Canada Revenue Agency (CRA) allows business owners to write off the cost of attending two conventions per year. To maximize your deductions, you may not want to exceed this number. Similarly, the CRA only allows you to claim 50% of reasonable food expenses or, as of 2019, a daily maximum of $51, and you don’t need receipts for this latter option. Crunch the numbers both ways to determine what works best in your situation.
Assessing Return on Investment
Budgeting can help keep costs under control, but keeping travel expenses relatively low shouldn’t be your only priority. It’s beneficial for your small business to assess the potential return on investment of every trip. Unfortunately, this can be hard to do, as many benefits are intangible.
If the trip focuses on meeting a client to talk about a deal, you simply want to consider the potential revenue from the deal. When you’re planning any other type of trip, try to hone in on specific advantages, such as networking opportunities, training, and exposure to new markets, and closely consider these issues before booking the trip. Also, it’s essential to assess the efficacy of each trip after it is over. If it’s a trade show or convention, in particular, the post-trip analysis can help you decide whether that event makes the cut for next year.
Ideally, it’s a good idea to provide your employees with spending guidelines for their business trips, but you should also require itemized receipts. Rather than offering blanket approvals on all reimbursement requests, you can look over everything carefully and ensure expenses are warranted. Finally, use itemized expense reports to identify overspending and areas for improvement.
As a small business owner, you appreciate your staff and can show that appreciation with incentives while also budgeting for office supplies and travel expenses. Always know exactly where your business stands. Make smarter business decisions now.