As a small business owner, you have to keep one eye on the bottom line continuously. Business owners often focus on bringing in more income as a way to grow their profit margin. But you can also improve your profit and loss statement by carefully tracking your expenses. When you lower the cost of running your business, you have more resources available to expand as well as a greater cushion to get you through a downturn. These are the strategies successful business owners use to successfully reduce business expenses.
1) Use Technology to Save Time and Streamline Your Workflow
The wise use of technology can speed up the processes that are part of your daily workflow. Strategically choose your basic business software, including accounting and project management software, opting for programs and apps that can automate key aspects of tasks essential for smooth business operations. For example, receipts for business expenses often get lost, especially when you forget to make a note of them at the end of each business day.
Today, low-cost online accounting software integrates with apps, so you can do things with your smart device like scan and store receipts when you’re in the field. You can do many simple bookkeeping and accounting tasks yourself because the software is so easy to use. This makes it possible for your accounting professional to be more of an advisor to you than a data entry clerk.
In some cases, freemium software can be a smart choice, since you can add features as you need them instead of paying for a bundle of features you’re never going to use. Sometimes, though, the best choice is to go with a name brand. You can’t lower your business costs effectively if using less-than-stellar technology allows a costly data breach to happen or causes important documents to get lost, for example. It’s a good idea to run a cost/benefit analysis whenever you’re evaluating computer hardware and software to make the right choice.
2) Track Your Expenses Diligently
Start by taking a snapshot of your expenses over the past several months to better decide where to make cuts. Having accurate data is key to the success of this strategy for reducing business expenses. When you use QuickBooks Online to track and report expenses, you have a clear picture of where you spend the most money, which helps you nip problems in the bud fast.
3) Train Your Staff to Exercise Financial Discipline
Do your employees negotiate prices with your suppliers? Do they overuse their expense accounts? To help them understand the benefits of controlling expenses, you might hold training sessions periodically to discuss the areas in which they can exercise financial discipline. You can encourage a thrifty attitude in your workplace by offering incentives to employees who find new ways to lower expenses.
4) Turn Your Business Expenses Into Rewards
If you’re considering a new business credit card, you might want to evaluate more than just interest rates and fees. Compare the perks offered, especially any rewards programs. For example, a business credit card that gives you frequent flyer miles can save on travel expenses down the line. Cards that offer cash back can lower your expenses, too. When choosing a business credit card, consider cards that offer rewards on the purchases you make most often like gas or office supplies.
5) Cut Back on Energy Costs
When you reduce energy usage, you can save money without cutting corners or sacrificing the quality of your products or services. For example, you maybe able to team up with neighbouring businesses to share the costs (and benefits) of installing a solar energy system. You might also consider leasing your roof space to a solar provider.
Switching to energy-efficient lighting and appliances can cut your energy bill significantly. Your local energy provider may be willing to perform an audit to give you recommendations for reducing energy use. As a bonus, you can win goodwill with your customers when you point out the steps you’ve taken to go green.
6) Take Every Tax Deduction Available
Many of your business expenses can turn into deductions at tax time. Be prepared to claim tax deductions for all the professional fees you paid through the year, including to attorneys and accountants. Employee wages are tax deductible, as are the costs of your inventory. Other deductible business expenses include advertising, rent, office supplies, and utilities. Even half of some travel or entertainment expenses count as tax deductions. To capture all possible tax deductions, which reduce your tax burden and enhance your bottom line, consider using the expense tracking tools provided in your online accounting software package.
7) Avoid Unnecessary Meetings
Meetings can be one of the greatest time wasters in a business. Meetings that don’t have a clear purpose can take up time that could be spent on other tasks. Unneeded meetings can still zap productivity after they’ve taken place. Here’s why: Every employee in the meeting puts their work on pause to attend, and they’re likely to need extra time to get back into the swing of work. And it takes even more time for employees who travel to meetings to regain their focus. To curb this issue, try to avoid scheduling meetings unless you have a clear agenda. To keep meetings on track and focused, you might limit the number of people attending to those who need to receive and share information.
8) Take a Hard Look at Your Purchasing Processes
Consumers save by buying in bulk, and this can help business owners save money as well. Crunch the numbers to see if the extra expenses you might encounter for storage of bulk items are worth the difference. You can also review your supplier relationships to gauge which ones will let you acquire supplies for less. Maybe you can bargain with your suppliers to keep business costs down, or find an insurance broker or credit card supplier who can make you a better deal. Look to cut fixed costs, especially on products and services that you need on a regular basis, to see a profound effect on your bottom line.
9) Hire, Reward, and Fire Judiciously
Some business owners consider all of their employees to be of equal value. The reality is that some employees deliver twice the results as others. Reward your highest performing employees, to keep them from looking for jobs with your competitors, and promote them into managerial slots when appropriate. Showing your team that promotions are possible is a great way to boost morale and increase productivity. If you have low performers on your staff, consider giving them the coaching and training they need, and consider letting them go if they don’t improve over time. Paying two low performers 100% of their salaries is far more expensive than giving a raise to a high performer who might receive 150% of the low performer’s salary but does double the work.
Putting cost-cutting strategies in place at every level of your business can help reduce your expenses considerably. Seemingly insignificant reductions made across your business can add up quickly to benefit your bottom line. QuickBooks Online makes it easy to organize your business finances so you can capture every opportunity to decrease business expenses, while also staying ready for tax time.