Many business owners were looking forward to 2021 after a year of significant hardship and stress. But staying afloat remains a daunting challenge in 2021. Here are 16 ideas to help reduce costs without sacrificing quality this year.
1. Encourage remote work. Remote working arrangements may have been precipitated by the COVID-19 pandemic. However, if this model has proven to be successful for your business, why not continue it in some form?
Obviously, having employees work remotely saves on utilities and other overhead expenses. Plus, many employers have found that remote work increases productivity and improves morale among employees.
2. Make better use of workspace. Most businesses can’t operate without a physical office. But they can use their workspaces more efficiently. If your business can easily downsize, you’ll save on rent and related overhead expenses.
To better operate within the available confines, your business may rely more heavily on mobile devices, shared workstations and multipurpose rooms. For instance, your conference room might double as a lunchroom. Redesign your office with key objectives in mind. Even if your business grows, you may not have to move to an expanded space.
3. Go paperless. The time of the paperless office may have arrived. Besides being environmentally conscious, eliminating paper — or at least cutting down use dramatically — can save your company money over time.
For example, consider switching to digital recordkeeping, setting up double-sided printing by default, finding alternatives to mailings and reusing wastepaper for notes. Train workers to think twice before printing something out.
4. Turn off equipment at night and over the weekend. This includes lighting at workstations, machinery and certain appliances. Workers and evening cleaning crews should be given specific instructions to make sure that they turn off whatever can be shut down without a problem.
5. Invest in energy-saving equipment and upgrades. It costs a pretty penny to keep your workplace warm in the winter and cool in the summer. Are you doing everything you can to keep energy costs in check?
For starters, “smart” thermostats rely on programs that better manage climate control. Also, instead of using just one or two thermostats, consider adding multiple controls on different levels or within extended spaces. This gives you more leeway to regulate conditions.
Other energy-saving options include the use of double-pane windows and light-blocking curtains. Going green requires an upfront outlay, but these investments can save significant money over time.
6. Replace outmoded equipment. Too often, companies stick with equipment or machinery that’s behind the times. Updating requires an initial expenditure, but you can generally make it back — and then some — through increased production capability. This also applies to office equipment, such as alarm and phone systems.
Generally, the tax law enables you to write off most of the cost (if not all) through a combination of the Section 179, first year-bonus depreciation and regular depreciation deductions. Consult with us for details.
7. Choose used or refurbished equipment. If you can’t afford to buy new equipment, gently used equipment may be more up-to-date than what you currently have. This includes office equipment, such as mobile devices, copiers and printers (if you haven’t gone paperless).
Used equipment can qualify for the same basic tax breaks that are available for new equipment. The Tax Cuts and Jobs Act (TCJA) recently extended the first-year bonus depreciation deduction to used, not just new, equipment.
8. Obtain early payment discounts. In a competitive business environment, vendors may offer discounts or other benefits for paying invoices ahead of schedule. For instance, if a bill is due within 30 days, the vendor might give you 2% to 3% back if you pay in full within 10 days.
If you have working capital on hand to pay early, it could be worthwhile to stretch to meet the deadline. This is often worth disrupting your usual payment routine — even in some cases that involve financing.
9. Negotiate, negotiate, negotiate. These days, virtually everything is negotiable, including lease payments, debt terms and insurance rates. Try to negotiate a better deal with vendors and suppliers even if the terms are long-standing or spelled out in a binding contract. It doesn’t hurt to ask. What’s more, if you can’t negotiate the price on some items, you may end up with another discount or some other benefit.
10. Shop around. Have you been buying goods from the same suppliers and vendors for years? If they’re unwilling to drop their prices, consider alternate suppliers and vendors. If you can maintain the same level of quality at a lower price, it may be worthwhile to switch.
At the same time, evaluate whether you truly need all the goods and services you’re paying for on a regular basis. You may be able to eliminate or at least cut back on certain items, such as dues, travel expenses and management perks.
11. Advertise electronically. Traditional advertising methods, including direct mail, print, television and radio, can be expensive. Get more bang for your bucks by advertising through email, social media, your website or other electronic means. For the most part, these ads are relatively inexpensive to produce. This is an opportunity to be creative while spending less.
12. Return to old-fashioned referrals. Not all marketing involves technological advances. Although social gatherings may be limited during the COVID-19 crisis, you may participate in Zoom calls or other videoconferences that allow you to network with business contacts that can give your firm a boost. Word-of-mouth advertising remains viable — and it’s free.
13. Review healthcare benefits. Many companies provide healthcare benefits to their employees. Take a close look at these plans for possible ways to reduce costs without reducing the quality of care, especially during the pandemic.
One possible solution is a high-deductible health insurance plan that can be coupled with tax-favored health savings accounts (HSAs). These may be suitable replacements for traditional health insurance plans that have become too costly for some employers.
14. Choose fringe benefits carefully. Benefits and perks help businesses attract and retain top talent. But hard times require hard decisions. This may be an opportune occasion to evaluate your benefits package to see what’s working and what isn’t.
Conduct a benefits survey to determine what your employees value and what they might be willing to sacrifice. If you’re forced to trim some offerings, look for ways to improve morale and salvage those that count the most.
15. Hire independent contractors. Employees are a fixed cost that generally remains stable over time. Most businesses need a dedicated team of employees to operate effectively. On the flip side, autonomous independent contractors represent a variable cost that can be dialed up (or scaled back) as needed. Using contractors also saves on employment-related costs, including payroll taxes and fringe benefits.
If you opt to hire freelancers to fill temporary gaps in your workforce, it’s important to strictly adhere to the IRS and U.S. Department of Labor (DOL) rules regarding worker classification. Consult with us for details.
16. Pool resources with others. Instead of purchasing all goods and services on your own, consider partnering with other businesses in the same industry or geographic area. For example, local restaurants might join forces to negotiate more favorable terms with a national supplier of food and paper products.
Likewise, an accounting firm and a law office might decide to share a receptionist, copiers and office space to help reduce overhead expenses. As an added bonus, these complementary businesses could refer business to one another.
What’s Right for Your Business?
This list of potential cost-savers is just a starting point. Contact us to help devise a cost-cutting strategy that works for your situation.