The idea of saving money never sounds like a bad concept. But as a small business owner, you know it’s easier said than done.
With every task that needs to be accomplished, either by yourself, a software, or another person or employee, the costs seem to add up faster than we can keep up with sometimes.
We’re experts when it comes to insurance, but we’re also small business owners ourselves (myself included) and can make the case for protecting your business with insurance, even when things are going well. Every dime you invest in your business goes into an effort to make you successful--without insurance to protect yourself, you could risk owing a lot of money in certain situations.
We’re here to tell you how you can save money. Other business owners do it, right? (And yes, there’s much more to it than just insurance!) Here, we’ll cover six different ways to approach saving for your small business.
Mind your invoicing & tax strategy.
We’re big fans of looking good when it comes to pay schedules, especially because paying bills and invoices on time is a best business practice for building trusting relationships over time.
But did you know that in some cases, paying invoices early can save you money?
Some companies provide a discount to businesses that pay their invoices ahead of time. Other vendors allow a discount if you arrange to pay for services or goods in bulk (e.g. paying upfront for a 12-month service instead of a monthly payment).
When it comes to invoicing contractors and vendors that you’re working with, keep tax season in mind. It differs per state, but on average you could end up paying 15.3% of taxes on each 1099, according to Intuit. When coming up with your rates, you can save money by doing the calculations and baking the tax rate into your service rate.
For example, if you typically charge $100/hr for a service, but know you’ll be taxes at 20% in your state, you could charge $120/hr. Then, keep that 20% of the payment in a separate account that you only allow yourself access to when tax season comes around.
Using a good tool for invoicing will help you keep all of your documents and corresponding accounts in order come tax season.
Speaking of tax season— you can also include budgeting for taxes in your business plan. Don’t want until March or April to organize your taxes. Instead, research ahead of time what options you have for deductions and which you plan to take advantage of.
Untangle personal & business expenses.
A common mistake that business owners make when the company is small, is to tie all business expenses to one account. But this practice can actually lose you money in the long run!
In order to save money, it’s best practice to establish separate bank accounts and credit cards for your personal accounts and business accounts. Keeping your accounts separate will help you save money in the long term because once the accounts are untangled, you’ll be able to easily identify places to cut back and save. Read the fine print closely when choosing what bank to open a small business account with, as many banks provide some type of monetary incentive, which is a great bonus.
If you’re looking at your accounts and business expenses and see that there are common monthly charges, it may be worth investing in a small business credit card, which can help raise your credit score, which will help save you money in other areas (such as procuring loans.
If you notice that you have recurring monthly costs that given your cash flow, you can pay off in full each month, then utilizing a small business credit card to make purchases can reflect well on your score.
Go green (to save green).
The phrase “save green by going green” may be getting tired, but we can’t deny that it’s a good strategy when it comes to cutting business costs. Taking note of how much energy you and your business utilize in different capacities (electric, gas, etc.) is a smart way to get a benchmark for where you can cut back in usage. Where there’s higher usage, there’s a higher bill.
If you’d like to do an energy audit, you can use programs provided by companies like Energy Star, owned and run by the Environmental Protection Agency. By going paperless and operating most of your business online, you can save money on products like paper, ink, and toner, and put that money towards something else your business needs.
Besides saving your business money over time and contributing to an effort to save our planet, the added bonus here is that making environmental efforts could convince customers to do business with you. Don’t be afraid to share on marketing materials that you’re doing what you can to help reduce your business’ carbon footprint.
Invest in managing your time.
How much is your time worth per hour? When it comes to saving money, it seems simple, but we rarely think of saving time. The old adage “time is money” really comes into play when you’re running a small business and trying to cut costs.
We recommend doing an audit of how you’re spending your time and how productive you and your teammates are being throughout the day. Are you spending a lot of time in meetings with people who don’t need to be present, whose time could be better spent on other activities?
If you calculate your employee’s time spent unwisely by their hourly rate, you’ll find that it’s a good idea to put their energy towards activities that aren’t so wasteful.
If you’re looking for some low cost or free tools to help you become more productive, we suggest looking into the tools below (and there are so many more out there!):
Buy/sell used equipment.
Operating a business is expensive, but we don’t want to openly look cheap and many of the tools and appliances we need to run our small business can be costly. Instead of spending money on new products, you can save money by buying products used or second-hand.
As long as they work and get the job done, there’s no shame in saving money by using a tool that someone else has utilized before you.
It sounds counterintuitive to suggest that you attempt to save money by outsourcing work, which in turn, costs money. We’ve been there and we get it.
Let’s think back to the calculations we did earlier on with the hourly rate of employees who could manage their time better. There comes a point where both your and your employees’ time needs to be allocated towards more pressing projects. In this case, why not employ a contractor who can perform certain tasks while you spend your time running the business and doing your job?
For example, you could pay a contractor $500 for a job they can complete in an entire day and you wouldn’t have to break the work up into a few days.
Of course, how you approach hiring contractors and outsourcing will depend on your insurance policy. Does your policy cover liability for people other than yourself? Make sure to look into this before outsourcing.
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At the end of the day (or pay period), every dollar spent counts. Of course, we’re fans of being proactive by ensuring you’re covered by insurance, as well. Let us know which steps you’ve taken to save on your bottom line. If you’ve already invested in insurance to protect your business, get a quote to see if you could be paying less with one of our customizable policies.
I’ve told stories since I learned to talk and written since I could hold a pen. As a small business owner myself - I'm a freelance writer and yoga teacher - I love contributing to the entrepreneurship community in different ways (including writing for Simply Business!). When I’m not drafting articles for SB, I can be found on my yoga mat, perusing an indie bookstore, and writing (with my cat nearby of course).
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry specific professionals who may better understand your business’s needs. Read our full disclaimer
28 November 2018 • 6-minute read
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*Harborway Insurance policies are underwritten by Spinnaker Insurance Company and reinsured by Munich Re, an A+ (Superior) rated reinsurance carrier by A.M. Best. Harborway Insurance is a trade name of Simply Business, Inc., which is a licensed insurance producer in all 50 states and the District of Columbia.