Whether you have a bootstrapped start-up or a well-established corporation, all businesses can benefit from stretching their budgets and keeping more cash in their coffers. Below are our favorite tips for stretching a business budget:
Leverage the tax code
While many people complain about taxes, if you are a business owner, there are many ways you can leverage the tax code to benefit you and your business. Below are a few examples of ways to leverage the tax code:
Tip: Track income and expenses
A simple task, but something that solopreneurs often underestimate. If you don’t track your income and expenses you run the risk of paying taxes on money you didn’t make.
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Tip: Save your receipts
A vital step in tracking your expenses, if you don’t save your receipts you run the risk of getting audited and losing out on tax deductions you thought you already had. What’s worse, if the audit comes years after you filed your taxes you’ll owe back taxes and interest.
Tip: Set up a retirement plan
Many entrepreneurs get so caught up with running their companies that they forget about saving for their retirement.
Entrepreneurs are provided with many options for saving for retirement while earning significant tax breaks. Examples of the most common types of retirement plans for small businesses are Simplified Employee Pension Plan (SEP IRA), Savings Incentive Match Plan for Employees (SIMPLE IRA), Self-Employed 401(k) plan and 401(k) plans.
Each plan comes with its own compliance requirements but they all provide an entrepreneur with valuable tax deductions. Take, for example, a SEP IRA. A SEP IRA plan allows employers to contribute up to 25% of compensation up to a maximum of $55,000 (in 2018) into each employee’s SEP-IRA each year. If you’re a solopreneur, this will reduce your tax liability and also provide retirement income in the future. If you aren’t a solopreneur this is a great way to reduce your tax liability and also provide an added benefit to your employees, but keep in mind that you must “make allocations proportional to your employees’ salary/wages.” In other words, if you’re not a solopreneur, you cannot allocate 25% of your salary for yourself, and only 10% for your employees.
Take advantage of free offers
While I’m a firm believer that if something is too good to be true it probably is, there are some free offers that exist to benefit businesses. Why? Because businesses drive tax revenue for the government, so it benefits the government to take some of that tax revenue and reinvest it back into businesses.
Tip: Individual Development Accounts
Did you know that the US government offers a subsidized asset building tool to allow low-income families to start a small business? Generally, these programs require an individual to save a certain amount of money (generally $1,000) and then the program will match the amount saved up to 400%.
For example, in San Bernardino, the program requires participants to take 10 workshops, and save $1,000 and then they can receive a $4,000 match. If you’re new to business and think you may qualify as low-income, do a quick google search of “the city or state you live in” and “IDA program” to see if there are any programs near you.
Tip: Free Business Coaching
Another free resource the US government offers to help business owners be successful is free and low-cost business coaching and workshops through the Small Business Administration and its affiliate programs (Women’s Business Centers, Small Business Development Centers, SCORE, etc.). The business coaches at these programs can help you with general business questions, but can also help you find new opportunities for your business such as teaching you how to get government contracts. To find an SBA center near you, click here.
Save Money
As a business owner, you work hard to bring in money to your business. Sometimes the best way to increase your bottom line and keep more cash in your business isn’t to increase your sales, but rather, to reduce your expenses. Below are some of the easiest ways to save money and reduce your business expenses.
Tip: Outsource
Are you paying more money than you need to for someone to do a job in your company, or worse, are you wasting your time doing simple tasks that you could easily and inexpensively outsource?
To determine if outsourcing would work for you, think about the tasks you do day-to-day, and also consider the tasks done by your employees. Next compare the time spent on those tasks to the rate you pay yourself, and the rate you pay your employees to get those tasks completed. Finally compare the cost of those tasks to cost of outsourcing. For example, if you are paying someone $20 an hour to answer phones for your company but the phone only rings a few times a day, you could consider hiring a phone answering service like Ruby Receptionists.
Or, if you’ve been struggling creating and editing your own website, you could consider hiring someone from the Philippines to be your webmaster using a website like OnlineJobs.ph.
Tip: Research the competition and negotiate
It never ceases to amaze me how powerful a few questions can be.
If you have recurring bills in your business do not hesitate to ask for reduced costs, longer terms, and/or reduced interest rates at least once a year. For example, you should shop around to see if you can get better deals with other companies that you use often (cell phone, banking vendor, auto insurance, etc.).
Once you’ve done your research you can call the companies you work with and ask for reduced rates. If they do not comply you can cite your research and tell them about your plans to leave if they do not offer a better deal. Most often, they will reduce your rates, but if not you can just as easily switch companies and go with the provider that charges you less.
Tip: Do your due diligence
While it may be time consuming to get quotes from multiple companies when you’re looking for a new vendor, it can save you money in the long run.
Rather than going with the first vendor you meet, consider getting quotes from at least three reputable companies and comparing their prices. Even if you decide to go with the most expensive company, you can use the other quotes as tools to negotiate their price down, and learn more about the vendors (one vendor may be able to share that another vendor uses lower quality materials in their product thus reducing their price, for example).
Tip: Ask questions
When you buy things for your business do not underestimate the power of asking questions. For example, if a vendor quotes you for more product than you need, don’t hesitate to ask them to reduce the order size and thus the cost.
On the other hand, if there’s a product or service that your find yourself purchasing on a regular basis, do not hesitate to ask if you can get a volume discount, or a discount for pre-purchasing the product or service over a period of time.
Another question I love to ask at the end of every transaction is if there are any discounts available.
Finally, don’t hesitate to simply question each and every purchase in your business. I’ve seen a recurring cost on a business owner’s books for a subscription-based online tool that a former employee used continue being paid for years because it was never questioned.
Conclusion
It may feel overwhelming to try to utilize all of these tips right now. Rather than feel overwhelmed, choose your favorite tip and take some time out of your day to see if you can leverage the tip in your business. You may be surprised by how much money you can save by simply taking a few minutes to work on your business instead of in your business.
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