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Money Management (Distributed by the New Jersey Society of Certified Public Accountants)

Ten Easy Ways to Save Money in Your Business

In slow economic times, a little belt-tightening can go a long way toward helping a small business survive and prosper. If you are a small business owner, the New Jersey Society of Certified Public Accountants (NJSCPA) offers you the following cost-cutting strategies:

1. Think Strategically
The first step in any cost-cutting strategy is to think strategically. Consider your business objectives, and determine where you can cut costs without compromising your ability to meet your objectives. You should understand how cost cutting can impact sales, customer service, inventories and other aspects of your business.
Start by looking at areas where you are currently over budget. Determine whether the increased expenditures are really necessary to meet your objectives. If not, scale back expenses in these areas.

2. Maximize Your Purchasing Power
Shop carefully and buy only the things you need, when you need them. Always negotiate for the best price on all the products and services you buy. Often, all it takes to get a discount is to ask. Scan the classifieds for sales and liquidations to purchase used office furniture, copiers and other equipment. Visit bankruptcy and government auctions (or online auctions like eBay and Yahoo!) that offer both used and new items at wholesale or discounted prices.
Increase your buying power by partnering with other small business owners to buy basic supplies, such as paper, in bulk. Look for group-purchasing partners who are in your industry or a related field who have similar needs.

3. Take the Expensing Deduction
Under the Internal Revenue Service (IRS) Code for Section 179 expensing deduction, in 2005 you may be able to write off up to $105,000 of the cost for new or used business equipment, instead of depreciating the expense over several years. To qualify, the equipment must be put into service by December 31.

4. Examine Your Service Needs
Don't limit cost cutting to tangible items. Service areas also offer possibilities for cost savings. Ask your phone company to tailor a calling plan to your needs, and see about bundling long distance, cellular and even Internet access into a less expensive package.
Monitor your energy usage and request that your local utility company perform an energy audit. Try installing automatic setback thermostats and auto-off light switches at your workplace to reduce your energy costs.
Plan your shipping and mailings to avoid expensive overnight delivery charges. If you must ship overnight, shop around for the best rates.

5. Review Your Insurance
Each year, reevaluate your coverage and shop around for the best price. If you decide to stay with the same insurer, ask your agent to review your coverage, conduct a risk assessment and suggest ways to save money.

6. Travel Economically and Only When Necessary
Before arranging a business trip, ask yourself if the trip is really necessary. Videoconferencing, teleconference calls and online meetings can sometimes be effective substitutes. If you must travel, shop around and book plane tickets early. If there are two airports within a reasonable drive, check to see which one offers the lowest fare. Wherever you choose to stay, ask for the lowest rate available.

7. Use Independent Contractors and Temporary Employees
Use independent contractors when practical. Just be sure you understand the IRS guidelines for hiring independent contractors, or you could face stiff penalties. If you have a seasonal business, consider hiring temporary workers during busy times rather than employing permanent year-round workers.

8. Share Space and Office Staff
If you are in the market for office space, check with a broker to see if there is someone who has space to spare. In addition to sharing office space, you may be able to negotiate the use of a
conference room, copier or other equipment needs. You may be able to share support staff as well.

9. Join an Association
Many trade and business associations have reasonable membership fees and offer discounts on such amenities as insurance, travel and long-distance phone service. Find an association that offers you the most attractive benefits package.

10. Maximize Deductible Business Expenses
Be sure to take advantage of available tax breaks to help lower your taxable profit. Consider whether you are qualified to deduct costs related to business travel and lodging, mileage, interest, business meals and entertainment, and advertising and promotional costs. Check with your CPA to be sure you are maximizing the available business deductions. If you don't have a CPA, you can easily locate one online using the NJSCPA Find-A-CPA service. Visit www.findacpa.org to locate a highly-qualified accounting professional who is right for you.

If you would like to receive more information on various financial matters, subscribe to E-CPA, the NJSCPA's free, monthly email newsletter. To subscribe, visit www.njscpa.org/finances or email a subscription request to e-cpa@njscpa.org.

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Money Management is a weekly column on personal finance distributed by the NJSCPA.

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