MONEY MANAGEMENTFrom the Virginia Society of Certified Public Accountants - Presented by Dean Knepper, CPA, CFP®
TEN EASY WAYS TO SAVE MONEY IN YOUR BUSINESS
(August 29, 2005) — In slow economic times, a little belt-tightening can go a long way toward helping a small business survive and prosper. If you are a small business owner, take the advice of the Virginia Society of CPAs and put these cost-cutting strategies to work.
1. Think strategically.
The first step in any cost-cutting strategy is to think strategically. Consider your business objectives and determine where you can cut costs without compromising your ability to meet your objectives. So, for example, you will want to understand how cost cutting may impact sales, customer service, inventories and other aspects of your business.
A good place to begin is to look at areas where you are currently over budget. Determine whether the increased expenditures were necessary to meet your objectives. If not, start scaling back expenses in these areas.
2. Maximize your purchasing power.
Shop carefully and buy only the things you need, when you need them. Make it a practice to always negotiate for the best price on all the products and services you buy. Often, all it takes to get a discount is to ask. Check out the classifieds for sales and liquidations where you can purchase used office furniture, copiers and other equipment. Visit bankruptcy and government auctions and even online auctions, such as eBay, that offer both used and new items at wholesale or discounted prices.
You can also increase your buying power by partnering with other small business owners to buy basic supplies, such as paper, in bulk. Try to find purchasing partners who are in your industry or a related field who have similar needs to make group purchases.
3. Take the expensing deduction.
Under the Section 179 expensing deduction, in 2005, you may be able to write off up to $105,000 of the cost for new or used business equipment, instead of depreciating the expense over several years. To qualify, the equipment must be put into service by December 31.
4. Examine your service needs.
Don’t limit cost cutting to tangible items. Service areas also offer possibilities for cost savings. Ask your phone company to tailor a calling plan to your needs, and see about bundling long distance, cellular and even Internet access into a less expensive package.
Monitor your energy usage and request that your local utility company perform an energy audit. Try installing automatic setback thermostats and auto-off light switches at your workplace to reduce your energy costs.
Do your best to plan your shipping and mailings to avoid expensive overnight shipping. If you must ship overnight, shop around for the best rates.
5. Review your insurance.
Each year, reevaluate your coverage and shop around for the best price. If you decide to stay with the same insurer, ask your agent to review your coverage, conduct a risk assessment and suggest ways to save money.
6. Travel economically and only when necessary.
Before arranging a business trip, ask yourself if the trip is really necessary. Videoconferencing, teleconference calls and online meetings can sometimes be effective substitutes. If you must travel, shop around and book plane tickets early. If there are two airports within a reasonable drive, check to see which one offers the lowest fare. Wherever you choose to stay, be sure to ask for the lowest rate available.
7. Use independent contractors and temporary employees.
Use independent contractors when practical. Just be sure you understand the IRS guidelines for hiring independent contractors or you could face stiff penalties. If you have a seasonal business, consider hiring temporary workers during busy times rather than employing permanent year-round workers.
8. Share space and office staff.
If you are in the market for office space, check with a broker to see if there is someone who has space to spare. In addition to sharing office space, you may be able to negotiate the use of a conference room, copier or other equipment needs. You may be able to share support staff as well.
9. Join an association.
Many trade and business associations have reasonable membership fees and offer discounts on everything from insurance, travel and long-distance phone service. Find an association that offers you the biggest benefits.
10. Maximize deductible business expenses.
Be sure to take advantage of the tax breaks that are available to help lower your taxable profit. Consider whether you are qualified to deduct costs related to business travel and lodging, mileage, interest, business meals and entertainment, and advertising and promotional costs. Check with your CPA to be sure you are maximizing the available business deductions.
The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at www.vscpa.com.
Lifetime Financial Planning, Inc.
Dean Knepper, CPA, CERTIFIED FINANCIAL PLANNER™ professional
2325 Dulles Corner Boulevard, Suite 500, Herndon, Virginia, 20171
208 South King Street, Suite 201, Leesburg, Virginia, email@example.com
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