Can’t reign in your business expenses no matter how hard you try? Here are five tips to curtail big-ticket budget items and finally gain control over expenses in your company.
Employ zero-based budgeting
Businesses that use traditional budgeting tend to rely on past budgets as a template for their next budget. But as the priorities of a business shift, old and unnecessary expenses can add bloat to a budget when carried forward to the next fiscal interval.
One way to control expenses in a company is to use zero-based budgeting. This approach begins the budget for each new fiscal period from a zero base or blank slate. Create a zero-based budget by reviewing past budgetary items and weighing them with current spending needs. By justifying old and new expenditures, you can achieve a leaner budget.
Annually review, renew and renegotiate supplier deals
Businesses rely on suppliers to ship goods, provide technology infrastructure and more. It’s easy to become complacent with your existing suppliers. But as competition increases, another supplier may be able to offer better prices.
Staying current with pricing trends is why it is wise to opt out of automatically renewing supplier contracts. Instead, give yourself the option to review suppliers and renew supplier contracts on an annual basis. This way, you can find the best deal on the goods or services you need.
Knowing the competition will enable you to renegotiate better rates and control expenses in your company. This can be the case even if you stick with the current supplier.
Divest from poor-selling inventory
Regularly reviewing inventory is an important step in recognizing when a product or service isn’t selling. If this happens, consider shifting your investment to products and services that are more likely to sell.
Remember that the manufacturing, marketing and sales of each product or service comes at a significant cost. You want these costs to be worthwhile.
One step you can take to reduce the inventory volume of an unpopular product is to sell it at a discount. Eventually, you can stop producing or acquiring more units of the product.
Downsize office facilities
Inventory isn’t only the pricey purchase for owners of brick-and-mortar businesses. The space you use to conduct business can also eat into your budget. If your current office exceeds your capacity needs, relocate to a smaller space with lower rent.
If you don’t need to interact with customers or clients in person, you can even move to a co-working space or home office. Don’t forget to factor utility expenses into your facilities budget and look for opportunities to save. Reducing energy consumption can be as simple as turning off lights or equipment when not in use.
Deduct legitimate business expenses
From purchasing equipment to traveling to client sites, some expenses are unavoidable in business. Fortunately, many of these business expenses can be deducted at tax time to reduce the net cost burden you incur during each year of business. This allows you to control costs in your company without having to slash essential expenditures.
Deducting business expenses is easy if you maintain adequate records of your spending. For example, claiming the mileage deduction can be as simple as enlisting a mileage tracking app like MileIQ to record your mileage.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.