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    0 Replies Latest reply on Jul 31, 2009 9:09 AM by PKSCPA

    Cost saving tips for small business owners

    PKSCPA Wayfarer
      Expenses always have to be looked through a microscope, more so in today's economic environment. Periodic review of each line item of the bank statement or cash ledger is necessary to make sure the company is doing all it can to reduce costs.

      Some of the areas small business owners need to look at are :

      Paper: Reduce the use of paper. Many companies have already become paperless but for a small business investment in these costs may seem frivolous. In such cases, companies
      should slowly reduce the use of paper in their day to day operations. Use of email or pdf documents instead of paper should be encouraged and finally a paperless environment
      should be put in place. In case documents have to printed, printing should be done in black and white and using both sides of the paper. Marketing and other newsletters should be sent by email instead of regular mail.

      Phone Bills: Try to talk to the vendor and negotiate bettar rates for the existing phone

      service. Get rid of unnecessary lines and instruments. In many cases switching to a VOIP (Voice over Internet Protocol) leads to tremdous savings in costs. In case of cell phones , savings can be obtained by having all the employees sign up for the company plan. Constant monitoring in this area is required to make sure there is no excessive personal use of the business cell phone. Similarly internet provider bills need to be reviewed to see if the best possible rate is being availed. Employees should be encouraged to use free messenger and chat services instead of using the phones to increase productivity and also reduce costs. Email should be extensively used as it serves as a tool to document conversation and also is available at no additional charge. An intergrated communication portal will help reduce overrall costs and should be encouraged to be used.

       

      Travel: Encourage all levels of management to travel economy class. If business class travel is needed, shop for fares, instead of buying the first one that comes up. Similarly shop for hotels too. Many times a weekday travel is cheaper than a weekend travel. In recent times many options like video conferences and teleconferencing are available at reasonable rates. Many a time this is a very economic alternative to travel and efforts should be made to see if the same objective can be achieved by videoconferencing instead of actual travel.

       

      Occupancy: Many small business can opt to have workers who telecommute or work out of their homes. This drastically reduces the space needs and the related occupancy costs. The businesses can have virtual offices or space they can rent for a day a week for weekly meetings with all the employees. Sharing of space and utilities is also an option for small business owners who do not want to have the high overhead costs.

       


      Payroll costs: If cash flow is tight, look at swtching to payroll companies that withdraw the funds only at the date they are remitting rather than companies like ADP which take all the taxes out at once and do not pay the government till a couple of weeks later.

      Supplies: Small businesses should shop online for most supplies and save time and money. The business should use the small business window and services offered by big retailers like Walmart and Costco whereever possible.

       

      Banking : Most banks allow free bill pay with certain minimum balances. Small businesses should reduce check printing costs and convert most payments to bill pay.

      Optimize the use of the credit cards, but pay the bills in full at the end of the month. This will normally give you a two to three month lag in making the payment depending on your billing cycle.

      AP and AR: Besides collecting bills on time, emphasis should also be given to AP during a cash crisis. Efforts should be made to avail of the credit period and at the same time make sure the bills get paid on time.
      Negotiate with your vendors for favorable rates or discounts.

      Small changes in all these expense heads will add significantly to the bottomline.

       

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