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Keeping tabs on monthly expenses does not come naturally to everyone, no matter how educated they are. But as a business owner, you have to focus on more than just how to make money. Knowing how to efficiently reduce your monthly expenses will go a long way toward ensuring your business stays afloat for years to come.
Here are seven of the most common business fees that I deal with on a monthly basis, and how I reduce them or deduct costs as much as possible:
1. Office Supplies And Equipment
Everyone needs an office, but where your office is located matters quite a bit. If you’re renting out a traditional office space, everything from rent to the chair you’re sitting on can be listed as an expense. Larger purchases, such as equipment, can be depreciated over several years on your expense sheet.
If you’re working from home, you can deduct the percentage of your home that you use for work, within reason. Home office deductions can be much more beneficial than actual office rent deductions — depending on how much of your home you are reasonably using and how high your mortgage is.
2. Utility, Phone And Computer
There are also traditional office bills to consider. Your internet and phone subscriptions (per employee) are deductible, as well as any utilities that you pay for at the office. Even office food and refreshments can go on your expense sheet.
When you work from home, you can deduct a percentage of what you’re already paying for. But when you work from an office and have to pay twice for things like rent, phones and internet, you can’t do the same.
3. Technology Subscriptions
In the 21st century, an entirely new category of business expenses has cropped up: subscription-as-a-service (SaaS) solutions. This is probably a much broader category than many realize, and chances are you aren’t listing everything you could be as an expense on your taxes each year.
For example, your Salesforce, Amazon Web Services, Google G Suite, Dropbox, Microsoft Office, Adobe Creative Cloud and other software subscriptions you have for work-related purposes can all be deducted. Perhaps more importantly, you may still be paying for SaaS subscriptions that you don’t use anymore. Check on credit card and checking account statements to see what you need to cancel.
4. Advertising And Marketing
According to Deloitte, marketing budgets comprise 11% of company budgets on average, but some industries have higher average marketing budgets than others. For example, consumer packaged goods companies spend up to 24% of their entire budget on marketing.
For small businesses, marketing and advertising are essential tools for lead generation. But because many small business owners are misinformed about the best channels to spend money on, a lot of their budget can go to waste.
In my experience, business to consumer (B2C) companies should focus on Facebook, Instagram and Google AdWords, which have the best reach and the cheapest ad costs. Business to business (B2B) companies, on the other hand, are better off focusing on LinkedIn messaging.
5. Networking And Clubs
Most small business owners — especially those in the B2B category — are members of business networking groups and clubs by necessity. Not only are these groups essential for lead generation, but they’re also a nice way to meet industry colleagues and potential partners.
What most people don’t realize is that you can deduct more than just the networking group or club fees and dues. You can also deduct most things that you pay for during these meetings or in follow-ups with fellow members. Breakfast, lunch and dinner with members can go toward your expense sheet, as well as any related travel expenses, such as taxis or metro fares.
6. Credit Card Processing Rates
Many B2C businesses have to pay credit card processing rates in order to accept payments from their customers. Small businesses that rely on local foot traffic, such as restaurants, clothing stores, salons and even clinics, have customers who regularly swipe to pay for products or services.
Many small businesses don’t bother doing their homework when it comes to selecting a credit card payments processor. Most will simply default to Square for in-person payments and PayPal for online payments. But these services, while well-known, often charge rates on the higher end of the scale. Shopping around for a local credit card merchant services provider will often yield a better rate.
7. Wages And Benefits
What is the biggest expense for most businesses? Salaries. Depending on your industry, wages and benefits can be as low as 15% or over 50%. Whatever the case, it’s often the single steepest expense and has to be carefully managed in order for a business to scale and grow. Hiring the wrong people isn’t only expensive, it’s one of the most common reasons small businesses (and even large businesses) fail.
One of the best ways to make sure your wages stay in check? Lean on contractors and freelancers instead. Not only will this save you a bunch of money, but it’s also a win-win situation for everyone involved. You won’t need to fire anyone who’s reliant on you for their livelihood if your revenue takes a hit.
A penny saved is a penny earned.
It’s tough running a business in the 21st century. Not only do more businesses close than open in most cities, now that everyone has access to the same resources and solutions online, the competition is also fiercer than ever. Small business owners need all the help they can get.
Are you doing everything you can to reduce your expenses and expand your bottom line? If not, it’s about time you started tightening that belt of yours.
June 4, 2019 at 08:06AM
Forbes – Entrepreneurs