Reducing Business Expenses
Business expenses are costs incurred in the ordinary course of business. … Business expenses are part of the income statement. On the income statement, business expenses are subtracted from revenue to arrive at a business’s taxable net income. Business expenses may also be referred to as deductions.
As a business owner, you can use this information to help work out your business income and deductions for tax purposes. Paying the right amount of tax is fair. Tax contributes to public services like schools, roads and hospitals, which is why it’s important that everyone pays the right amount of tax.
Most income you receive from carrying on your business is assessable for income tax purposes.
You can claim tax deductions for most business expenses. You may also be eligible for certain concessions, offsets and rebates.
- keep accurate and complete records of your assessable income and expenses
- use the correct method for calculating and reconciling the amounts you claim
- report all income and deductions to us at the right time
- pay any amounts owed on time.
See the ATO’s definitions for explanations of tax and super terms that you don’t understand.
Among the biggest hurdles that a business faces is the money it doles out periodically. The company may earn profits, but without reducing the cash-outs, its growth can be hampered and sustaining the business can be a cause for concern. So you need to cut down your expenses. It can be tricky, but it can be manageable, You need to be resourceful enough and you will definitely need a firm grasp of your business’ processes. It also helps to have access to fast business loans.
But reducing business expenses isn’t the only thing that you should attend to. There are other factors that could impede your business’s ability to serve customers quickly. Lack of organisation and lengthy process times can impact business margins.
The goal is to have an efficient business system that has reduces expenses and maximises earning potential. Here are some of our tips to help you.
1. Hire Skilled Freelancers
Staffing can be expensive, especially for new companies. The firm has to shoulder salary expenses along with employee benefits, periodic cash bonuses and leaves, which can affect productivity. It’s great to have your own employees to handle your core business. But if you want to get a web site designed, content writers or marketing agency, but don’t want to hire anymore, consider hiring freelancers.
Companies can hire freelancers per project or for longer periods. It all depends on what you need. More often that not, freelancer rates are cheaper than getting a full time employee. The reason for this is that you don’t have to pay for overhead costs and other full-time employee benefits.
The scope of work that a business can secure from the freelancer market is extensive, spanning from writing content and website design/development to business consultancy and secretariat work. Think of it as the virtual form of the physical job market.
Businesses, however, should not just settle for the first freelancers they encounter. Similar to the traditional hiring process, their skills should be ascertained as well as their ability to turn over deliverables in a timely manner.
Going for experienced freelancers or seasoned freelance teams is a must, as their outputs are far better than new freelancers. They’ve worked with various clients and employ an efficient system of their own. They may be a bit more expensive than the average freelancer, but they’re more likely to provide high quality outputs. You can still get new freelancers because their rates are cheaper but just make sure to check their feedback and ratings.
There are a number of online outsourcing companies that provide ratings and feedback for freelancers subscribed to their site.
2. Reduce the Cost of Utilities
The simple act of replacing regular electric bulbs with LED lights might seem insignificant at first, but once the electric bill arrives, the difference is certainly noticeable, more so if the electrical expenses for the entire year are tallied or at least projected. The same goes for other utilities.
Given this, companies can use energy-efficient appliances in the office and set the air-conditioning unit to “Auto Mode,” or set the HVAC to periodically switch itself off when regulating room temperature. If possible, the company can also use faucets that automatically shut themselves off as well as “no-flush urinals.”
You can also consider using renewable energy sources such as solar and wind power. The installation could be a little pricey but it’ll save you a lot of money in the long run. You’re also saving the environment.
3. Keep a Virtual Office
The rent for office space jacks up a company’s overhead expenses, coupled with expenditures on utilities, association dues, and stringent tenant policies.
If your business doesn’t necessitate the physical presence of employees and they can work remotely, consider getting a virtual office. These , virtual office platforms provide remote receptionists and virtual assistants, and acts as a dashboard for communications (for remote employees.
If you’re worried about client meetings, we recommend using hotels or fancy restaurants. Some companies even hold their office meetings at cafes or at a nearby Startbucks. If you need video conferencing, some hotel business centers offer it.
The costs involved in keeping a virtual office are much lower than maintaining a physical one.
4. Take Advantage of Free Open Source Software
Businesses should use new equipment, computers and software to be more efficient and responsive. But just like new machines, purchasing and upgrading software, can be costly. It can potentially put a dent on a company’s operating capital. If you’d like reduce this particular business expense, make use of free open source programs/platforms found on the Internet. Not only do they offer the same features offered by their paid counterparts, some online services can provide file storage.
For instance, a business can use a free, web-based project management program like Trello to create a layout of tasks, task assignments, resources, and an interactive to-do-list. There, employees can view their tasks and the time to complete them . They can store their files using another free service in Google Drive, use Google Docs for documents and reports, and create a Behance profile as a means of displaying design studies. All of the aforementioned free services can be attached to a Trello board for easy perusal and the quick completion of tasks.
5. Have a Paperless Office
Most companies and enterprises use paper to print out invoices, presentations, documentation and more. Paper isn’t really that expensive but given the amount of reams used by large enterprises monthly, it can become a huge expenditure. Cut this particular business expense by going paperless. Business owners can view virtual documents as actual reports. They can be passed around quickly through an instant messaging platform, social media, project management software or email.
Some operations can even forgo the use of bulky and expensive file cabinets, since documents can be filed on the cloud via Google Drive and DropBox. External hard drives can be purchased and the memory of the office network can be expanded to have a cost effective back-up for the files stored online.
6. Organise Budget for Expenses
When your business has a number of payables, sometimes it’s hard to keep track of all of them, especially if you’re doing it manually. Not paying these on time or not settling these debts can result in higher interest rates. Getting lost in the number of payables can lead to financial complications. To avoid this, you have to organise your business expenses. An automated cash flow system will do wonders for your business as it can monitor the inflows and outflows of money at any given time.
Furthermore, going with a company that provides alternative lending is less costly and has fewer complications. Firms like Capify offer creative financial solutions that are easier to pay, involve non-stringent application requirements, and can be procured in a few days. This way, businesses can get a swift financial boost whenever it needs to replenish its inventory, settle expenditures, or make worthwhile investments.
Or call 1300 760 930 to speak with one of our friendly Lending Consultants now.