In order to save money, a business has only two options: to trim expenses or increase profits.
1. Common Business Expenses
Business expenses are necessary costs that need to incur for the business to operate. Not all expenses a company incurs are tax-deductible. Expenses that you can deduct are those that the IRS considers to be both “ordinary and necessary”.
Some expenses also need to be capitalized which is usually an expensive asset that a business invests in to generate revenue, but is also one that will depreciate over a number of years like a piece of equipment. Correctly identifying and classifying expenses allows a business to assess their profits accurately.
Here are some common business expenses that may be partially or fully tax-deductible.
If you operate your small business from home, you may be eligible to deduct partial expenses from your rent, mortgage interest, property taxes, business phone line (if separate from home line), security system and maintenance costs.
We can also classify expenses as:
Although you cannot deduct personal expenses, you can deduct the business part if the expense is used for both personal and business reasons.
2. Ways To Increase Your Business Profits
For a business to continue operating in the future, it needs to be profitable. Here are a few ways you can improve your profitability.
Increase the price of your offerings
If you have a loyal customer base whose trust you earned with the quality of your offerings, they shouldn’t mind if you increase your prices every once in a while.
Achieve greater efficiency
Cutting steps in operations or reengineering them altogether can make them more efficient. The goal is to eliminate tasks that don’t add value to the final product or your bottom line.
Look for ways to improve your offering
Consumers like companies who listen and go the extra mile. A constantly evolving offering will help you shorten your sales cycle, strengthen brand loyalty, and perhaps, even allow you to increase pricing. Don’t allow your product to get outdated. Make the buying process easier and simple.
Feed your winners; starve your losers.
The Growth-Share matrix states that your efforts need to be directed at your profitable customers so you can ‘milk’ the cash cows to feed your stars and R&D efforts that should become cash cows in the future. Cutting your efforts on losers (dogs) will save you valuable resources that you can use to reward your most profitable customers.
3. Simply Money-Saving Tips for Your Business
Saving money is always easier said than done but by no means is it impossible.
Think of ways to reduce your basic costs
When setting up your utilities look for a provider with a competitive rate like Gas South.
Going green saves green. The more energy-efficient your space is, the lower utility costs you’re going to have. Moreover, green investments could make you eligible for tax credits and deductions, further benefiting your bottom line.
Software makes bookkeeping, accounting and presentations a breeze.
Cut down on everything you can
The rule of thumb is: when in doubt, go without. You can apply it to any purchase as well as unnecessary meetings. Just do a rough calculation based on the number of people and their average hourly salary, and you’ll be surprised how much money you throw away.
With so many price comparison websites, it’s so easy to ensure you are getting the best value for your money. Negotiate with suppliers and always ask for discounts.
Takeaway – Saving money as a small business can be tricky, especially if you are just starting. However, it’s more about the mindset than actual figures. Remember, every action counts and helps your business on its way to better financial health.