Different types of businesses naturally encounter different costs, but some operational expenses are common across the board.
Evaluating and minimizing these costs is good for your cash flow. So let's take a look at some of the biggest small business expenses - and what you can do to keep them under control.
Operating out of your home or garage comes with certain advantages over renting a public office or retail space. But whether you're paying a mortgage or leasing a studio, your location represents one of your biggest company expenses.
If you've been renting for a while, consider renegotiating your lease – especially if rents have gone down in your area, or there's some other event (local construction for example) making your space less desirable.
If your lease is up for renewal and you've established a solid business presence that can weather a move, it might be time to look around for a cheaper location.
Investigate the merits of buying your workspace outright. Much like purchasing a home and renting out the basement, buying a building with space you can sublease could bring in extra income and reduce your overhead under the right circumstances.
Take advantage of government incentives like tax credits for purchasing an electric car as your company vehicle.
Choose more energy-efficient office, warehouse, and kitchen machines and appliances.
Switch to a lower energy workplace lighting option.
Keep all your equipment in good working order.
Shut down unnecessary electronics at the end of each day.
A great team is essential for success. But full-time salaries - and the benefits and taxes that go with them - can eat up your budget in no time.
Evaluating your staff situation frequently is essential for maintaining an efficient balance between meeting the demands of your growing business, and managing the costs associated with personnel.
In many cases, outsourcing certain tasks on an as-needed basis (think bookkeeping, marketing, or product support) will make more sense than carrying a regular payroll expense.
Every company's risk management plan should include adequate business insurance coverage. While this protection may seem costly on a month-to-month basis, it's a priceless investment when you actually need it.
There are many specialized forms of commercial protection, but not all of them will benefit your business. It's important to recognize that, while your insurance needs may change as your company grows, excessive policies and premiums are an expense you'll never recoup.
Do your research, find an insurance advisor you trust (preferably one who specializes in your industry), review your coverage needs annually, and consider consolidating policies through a single provider.
And remember the longer your history of paying premiums on time without a claim, the more leverage you have when it comes to renegotiating rates.
Keep an inventory of office supplies and other business materials so you can monitor their usage over time. Do these expenditures - and the rate at which they're occurring - make sense? Or is there some wastage going on that needs to be dealt with?
Remember that you can only deduct 50% of business-related meal and entertainment expenses on your annual tax return, so it may be worth keeping these events to a minimum.
If you typically use a business credit card for stop-gap financing - but don't pay off the balance every month - consider applying for a business line of credit instead. This "revolving loan" typically offers lower interest rates and more flexible repayment schedules than the average company charge card.
When it comes to trimming company expenses, skimping on critical services like accounting and tax return preparation is NOT the best place to start. Professional assistance with keeping your expense records organized not only allows you to see where your money is going, it lets you make the most of any business deductions.