5 Cost-Cutting Tips To Reduce Your Company’s Expenses

By Pantea I. Fozouni

May 16, 2022

How to cut costs in business

It's essential to save money when you have a small business, especially in the beginning stages when revenue is scarce. If not kept in check, expenses can balloon and quickly damage your company financially.

An experienced bookkeeper isn't the only way to keep your business expenses under control. There are several other methods you can use to stay within your budget, and you don't need an accounting degree to implement these strategies.

Here are five cost-cutting measures that can help your company avoid going into debt:

1. Promote Remote Work to Your Employees Whenever Possible

The pandemic forced many companies to switch to telecommuting and remote work, and even now that life is returning to normal, some businesses are choosing to keep a majority of their employees at home or allow them to split their time between working from home and the office.

The transition to remote work has been growing in popularity due to the significant cost savings it offers employers. According to Global Workplace Analytics, for each employee working at least half-time remotely, businesses can save up to $11,000 annually. In addition to direct cost reductions, employees also report higher morale and satisfaction with their jobs when working from home, leading to increased productivity and profitability.

If your company is able to, working remotely should be the main focus as it significantly cuts down on expenses and improves employee productivity and attitude. There are many ways that working from home can help your company save money, and they are listed below:

  • Fewer utility costs: less electricity, internet, phone, and water usage in the office
  • Reduced amount of office space (and real estate costs) required to house employees
  • Lower bill for cleaning services with fewer staff onsite
  • Reduced office supply and food costs from having people work remotely
  • Commuting cost savings for employees - no need to travel to an office every day!

2. Use Independent Contractors

As an employer, you understand that your employees are one of the biggest expenses for your company. In addition to recruitment, hiring, and training costs, you're also responsible for payroll taxes, unemployment insurance, workers' compensation, and disability payments. Therefore, as a way to reduce labor expenses, independent contractors (ICs) should be used where possible.

When you use independent contractors, not only do you save on payroll taxes and employment insurance, but you also don't have to offer them benefits and perks such as health insurance, retirement plans, paid time off, or office space with equipment. In fact, research shows that by using ICs exclusively for your labor needs can result in a total savings of up to 40%.

With the growth of the gig economy and online work-for-hire platforms, it's easier than ever to find qualified contractors. Even so, it's essential that you establish your working relationship with your independent contractor(s) properly, using sound employment agreements; otherwise, you risk incurring significant penalties that could cost you more than what you save by hiring contractors instead of full-time staff. Contact us, your local Family Business Lawyer™ for help drafting appropriate agreements or reviewing existing ones.

3. Save Money by Paying Your Invoices Early

Many vendors are willing to give you small discounts for paying your invoices early. For example, it’s common practice for vendors to offer a 2% discount when you pay your invoice in full within 10 days instead of the typical 30 days. This discount is often represented by the terms “2/10 net 30” on the invoice.

Paying your invoices early has a number of benefits that can help your business grow. For one, it helps build strong relationships with vendors, which could lead to getting bigger discounts and more favorable payment terms in the future. Additionally, consistent on-time payments will help establish good business credit. And the better your credit is, the easier it will be to attract new vendors, investors, and lenders.

4. Consider a Cash-Back Business Credit Card

If you have a high credit score, you can qualify for business credit cards that offer cash-back rewards. The top business cards give 1.5% to 3% cash back on all purchases, with some giving an even higher return rate. Paid off immediately, this becomes a great way to finance regular or large expenses for your company without any sort of interest accrual.

Business credit cards that provide airline miles as a reward can be just as beneficial—if not more so—than cash rewards. If you are constantly traveling for work, then these types of business cards could offer you free money, assuming you pay off the balance in full each month and use them for planned purchases.

5. Make the Most Out of Tax Deductions

Taxes are the most expensive thing for small business owners, but you can lower your taxes by taking full advantage of write-offs. And there are plenty of deductions available - many that you may not know about - including a few only accessible during this year.

By working with us, your Family Business Lawyer(TM), and your CPA, you can avoid missing out on any deductions. In addition, here are some business deductions that you should always take advantage of when possible.

Utilities: Any utilities you use for your business are fully tax-deductible. This includes things like water, electricity, trash, telephone, and internet service. And as long as you use it at least part of the time for business purposes, remember to put the cost of your cell phone on the expenses side of your P&L statement too.

Insurance: The majority of business insurance types allow you to deduct 100% of the associated costs. Examples of these coverages are health insurance, general liability insurance, commercial property insurance, business interruption insurance, professional liability/malpractice insurance, cyber security protection, worker’s compensation insurance, and vehicle insurance.

Office rent: If you lease or rent your business office property, the government allows you to deduct those payments from your income taxes.

Office Supplies: You can deduct a wide range of things that are commonly found in an office, such as paper, pens, printer ink, staples, envelopes, and office furniture items like computers and printers.

Business Interests: Businesses can write off any interest charges incurred from a business loan or business credit card. This also extends to additional fees attached to the account, such as monthly service fees and annual credit card fees.

Travel Expenses: You can write off many business travel expenses, such as airfare, car rentals, hotels, tolls, and meals.

Business Meals: Business-related meals are only 50% deductible under most circumstances, but for the years 2021 and 2022, any meal from a restaurant is 100% deductible--takeout or delivery included. You don't even have to eat the food on site!

Advertising and Marketing: All expenses related to advertising or marketing your business are completely tax-deductible.

Professional services: You can deduct any fees paid for professional services related to your business, like legal fees, accounting, and bookkeeping. This would include the fees you pay us as your Family Business Lawyer™- which makes our services more affordable.

This post forms part of our Small Business Series and to access the other in-depth articles, please visit the links below

Keep Your Business Running Smoothly

This post forms part of our Small Business Series and to access the other in-depth articles, please visit the links below

7 Tips For Creating A Winning Business Plan
How To Choose The Right Entity Structure For Your Company—Part 1
How To Choose The Right Entity Structure For Your Company—Part 2
How to Grow Your Business for Sustainable Success in 2023
5 Best Practices For Establishing Healthy Boundaries With Clients
6 Essential Strategies For Starting A New Business
Putting Your Kids On The Payroll Can Benefit Your Business AND Help You Save Big Money On Your Taxes
3 Red Flags To Watch For When Dealing With Problem Clients
5 Strategies For Boosting Your Startup Business’s Cash Flow

If you're a business owner, one of your top priorities should be to maintain a steady cash flow. However, we understand that it's not always easy to do so. As your local Family Business Lawyer™, we'll gladly assess your current financial practices and offer suggestions on how you can improve them. This will not only help prevent any future money troubles but also free up the time and energy needed to focus on making other improvements needed to ensure the success of your business. Give us a call today to get started!

If you are looking for legal assistance for your business, look no further than us! We offer a wide range of services that can help you make sound decisions for your business during its lifetime and after your death. In addition, we provide a LIFT Start-Up Session or LIFT Audit specifically designed for businesses that are already up and running. These audits include an examination of all the legal, financial, and tax systems currently in place. Give us a call today to schedule an appointment.

At our law firm, we want what's best for you and your business. We offer a wide range of services to assist you in making sound decisions about your company throughout its lifetime and after your death. To help you even further, we provide LIFT Your Life And Business Planning Sessions. These include an assessment of all the legal, insurance, financial, and tax systems integral to maintaining or dissolving your business. Schedule online today.

This article is a service of a Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.

We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.

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