The following is a guest post by Adam Gottlieb.
As we march full steam into the new year, maintaining adequate cash flow continues to be one of biggest concerns (read: headache) for small and home-based business owners. For this reason, a focus on cost-cutting and bootstrapping, once the domain of frugal-minded small business owners and entrepreneurs, has now become the mainstream way of doing business.
That said, one surefire method for small business owners looking to ease a cash flow crunch is to find ways to save on their overhead business expenses. The following are five things small business owners can do now to significantly reduce their overhead costs:
1. Make resource-conserving capital investments. Make an investment in Energy Star certified equipment when devices need to be upgraded or replaced. The savings you’ll reap from a reduced electricity bill will make the purchase pay for itself. Moreover, under section 179 of the IRS tax code, you can write off the full cost of most equipment purchases up to $500,000.
2. Instill energy-conserving habits. Even if you don’t opt for new equipment, by adapting several easy, low-cost changes in the way you use utilities and other resources, you can reap significant savings. Some low-cost energy-reducing products include: CFL light bulbs, a power strip that stops phantom energy draws, timers, and light sensors. Resource-conserving practices include: shutting down computers when not in use, reusing shipping material, printing double-sided pages, using GPS when traveling on the road, and not letting vehicles run idle.
3. Claim business tax deductions in full. There are numerous tax deductions and tax credits available to small and home-based business owners, and it would be a shame not take advantage of them. (Yet countless small business owners do just that.) To help ensure that you are claiming all eligible tax breaks, you should first consult the IRS’s Small Business and Self-Employed Tax Center for a clear and up-to-date guide on small business tax legislation. You might also want to consider hiring a qualified tax preparer to do your business taxes or make use of tax preparation software, such as that offered by TurboTax. Additionally, those earning $49,000 or less should consider taking advantage of IRS Volunteer Income Tax Assistance Program, which offers free tax preparation by trained community volunteers. Finally, if your adjusted gross income is $58,000 or less, you can take advantage of Free File, the IRS’s electronic income tax preparation and tax filing system.
4. Put the right (free) systems in place. Many small businesses today are using small business tools and applications to help them run their businesses more efficiently. Though the majority of these apps are priced for the small business market, they can still put some strain on an operating budget. Where money is tight, you should consider opensource alternatives. Some popular examples include, the Linux operating system, Collabtive and OpenProj (project management), TurboCash, and OpenOffice. There are also several mobile opensource apps. Depending on the needs of your business, you may be able to save yourself a lot of money in license and service fees by using these free options instead.
5. Keep an eye on the financial health of your business. When business owners are not properly in touch with the financial state of their businesses, it opens the door to costly mistakes down the road which easily could have been avoided. One way to keep overhead costs down is by minimizing those costly endeavors that suck up resources with little return on investment. You can do this by having in place a system for determining every major initiative’s Return on Investment (ROI). There should also be a regular schedule of financial reporting (including cash flow statements and balance sheets) and benchmarking performance.
In short, with a little effort and foresight, there are numerous ways small business owners and entrepreneurs can attain significant savings on their business overhead costs.
Adam Gottlieb, is a small business consultant with over ten years experience helping small and home-based businesses improve their image, increase sales and better manage their resources (both the animate and inanimate ones). He is currently the owner and senior editor of the The Frugal Entrepreneur small busines blog, providing business tips and resources to frugal small and home-based business owners.
Photo by jurjen_nl.