Business expenses are what happens as a business creates and delivers its offering. But for a business to survive and thrive, it has to be profitable and that means that sales need to exceed those expenses and the more, the better.
- Common Small Business Expenses
It’s important to understand that there are several kinds of expenses. Ordinary or necessary are those costs that are common in the industry such as employee wages, office rent, license and regulatory fees, utilities etc. Then we have direct costs such as labor involved in making a product or an offering and indirect such as depreciation of equipment or executive compensation as it is not directly related to building the offering itself. There is also interest expense that no one who has an interest to pay can forget about. Basically, you need to categorize every cash outflow that went away to enable your business to operate in one way or another. Moreover, you need to be very careful that you don’t mix personal and business expenses as this will get IRS on your back.
- Simple Ways To Cut Your Costs In Half
The good thing about a small business is that even small steps in the right direction can make significantly benefit your bottom line.
Work on your company culture
Although improving company culture is time and energy consuming, it can result in massive cost-savings. By working on employee wellbeing, you are increasing your company’s productivity. Many companies tend to overlook this aspect and end up only speaking nice things about their company culture without actually putting in the effort to create that supporting environment that allows businesses to reap many rewards. Happy employees are also loyal and commitment due to a sense of belonging, they will even be inspired to help you find new ways to lower costs.
For instance when shopping for an electricity or natural gas provider do an apples to apples comparison to find the most affordable rate and the plan that best suits your business. Be a smart shopper whenever you have to make a purchase. Talk to your suppliers and associates and let them know you are negotiating. This is the time for your negotiating skills to shine.
Modernize your efforts
Network more, advertise less. Be more present on social media and use it as a channel to communicate to your consumers.
- Small Business Tax Tips That Will Help You Save Money
What every successful businessman will tell you is that the secret to profitability is in figuring out how to legally reduce your tax bill.
Find out if you are eligible for a tax credit
Tax credits are as close to free money as you’ll ever get and lucky for you, governments love small businesses because at the end of the day, they keep the economy going.
Save every receipt
You cannot afford to get lazy on expense tracking as you risk throwing money out the window. Business expenses qualify as business tax deductions when they’re “ordinary and necessary.” Tax deductions aren’t called tax “shields” for nothing as they result in lower taxable income.
It’s normal for a small business to take time before reaching profitability. When your business starts to earn a profit, you can use prior business losses to lower your tax bill with the net operating loss (NOL) deduction.
Use a home-office deduction
You can qualify for another special deduction when you dedicate a portion of your remodeled home to your business. You calculate it by multiplying square footage by $5 so the designated space needs to be clearly differentiated from the rest of your household and not exceed 300 square feet.
Lowering expenses means protecting your business. Although it shouldn’t come as at the cost of lowered quality which is what sells your offering in the first place, even the smallest reduction in expenses can have a significant impact on your business’ profitability, especially in an uncertain economic environment, like the one we’re in.