As a small-business owner, there’ll be times when you need to boost cash flow while keeping prices competitive. Or maybe you’re just starting a business and are losing more money than expected, but you can’t figure out why.
Even if you’re already frugal, there likely are plenty of ways for your small business to slim down and spend more wisely. Here are some tips from experts on how to cut costs in ways that are productive and responsible.
- Track your inventory, then buy in bulk where possible.
This is an essential first step for new small-business owners, but enterprises of any age can benefit from re-evaluating their inventory. Track your inventory for a year and look at where most of the money goes. This may not seem like it will cut costs on its own, but after a year, you can take a hard look at what the business really needs and find the best deals on those things.Buying in bulk sounds more expensive, but it’s ultimately a big money saver. “No one should ever buy a ream of paper, they should always buy a case of paper,” says Robert Reed, a financial advisor with Partnership Financial LLC who specializes in helping creative professionals manage their businesses. This is because bulk purchases almost always cost less per unit than making multiple small purchases.What if you use a lot of a product, like paper, but not enough to justify buying a whole case? “Find someone else who will split a case,” says Reed, such as a business owner in your office building who has the same needs. You both save money, and now you have a new connection for future sharing opportunities.
- Do things yourself and use what’s readily available.
Michael Sander, a financial planner and senior vice president with The Creative Planners Group who specializes in one- to two-person businesses, is a big advocate of doing things yourself. Don’t pay a bookkeeper hundreds of dollars a month to do the books, Sander says. Instead, “take a QuickBooks tutorial and do the books yourself.” Not only is it a long-term money saver, you’re also developing a valuable skill.You don’t need complicated inventory-tracking software to keep track of business expenses, Reed says. Not only would that cost money, it would take valuable hours to learn how the software works. A generic office software suite, used correctly, can do just fine. “If you can find out a way to get to do what you want to do, you don’t have that steep learning curve,” Reed says.
- Don’t compromise on important expenses.
For some expenses, it may cost more long-term if you try to save now. Steven Podnos, a registered investment advisor and principal at Wealth Care LLC, urges business owners to have an emergency fund or buy insurance for their office space or large assets. “A little insurance to cover catastrophes might cause you to spend less in the long run,” Podnos says.Sometimes, spending more now may actually help you save a lot more later. Sander says business owners should take advantage of the Section 179 tax deduction, which allows you to deduct purchases and leases of items such as business vehicles over 6,000 pounds, computers, software and even personal property used for business. While this does mean that you can spend a little extra money and get a lot back on your taxes, Reed says this isn’t an excuse to overbuy. If you need a computer only for word processing and bookkeeping, there’s no reason to buy a top-of-the-line model and write it off just because you can.
Reducing your expenses may not be the easiest or most glamorous way for your business to make more money. But with these tips, you can get your expenses in check.
Veronica Ramirez is a staff writer at NerdWallet, which provides clarity around decisions that help you start or grow your small business. We provide clear unbiased information, entrepreneur-focused advice and tools for small-business loans, tax and legal issues. We also connect you with experts who can answer questions about growing your small business.