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Ways to keep lid on expenses abound

Know the Score

Posted: September 19, 2008 9:31 p.m.
Updated: November 21, 2008 5:00 a.m.
 

Here are the next 12 tips for keeping your business expenses under control:

n Invest excess cash in an interest-earning account. It’s amazing how many businesses let their checking accounts build up to ridiculous levels.

Big corporations manage their cash by keeping enough in the checking account for immediate needs and to waive service fees, but investing excess cash in interest-earning accounts.

n  Shop for the best terms on business loans. Always remember that the business of making loans is very competitive. Interest is by far the major source of income and profit for banks and other lending institutions, so lenders are competing for your business.

You should compare loan terms and conditions among various lenders so that you get the best one that meets your needs.

n  Take merchandise on consignment. If you have a retail business, you might be able to take some or most of the merchandise on consignment.

This is one way to stock inventory without using any cash. This way, you pay only if and when the goods are sold.

n  Consider employing your spouse and/or children. It’s in your financial interest to keep your money flowing into the family coffers. Be sure that employed family members really work lest you cross the IRS.

n  Delay mailing bills to customers so that payment will not be received until the next tax year. If you’ve had a profitable year, you may want to avoid incurring more taxes.

If you’re a cash basis taxpayer, delay sending out bills until late in the year and/or reduce collection efforts so that payments will be received in the next tax year.

n  Pay business expenses in the current year rather than deferring payment until next year. The more deductible expenses you accumulate during a profitable tax year, the smaller your tax bill will be.

n  If you miss the deadline for a Keogh, you may still be able to establish and fund a Simplified Employee Pension. If you’re self-employed or own a small business, you can take an income-tax deduction for contributions to your company’s pension plan.

A Keogh plan allows you to set aside more money, but it must be established by Dec. 31 of the tax year in which you want the deduction.

If you missed the deadline, you can establish and fund a SEP plan until your income-tax filing deadline.

n  Contact the Small Business Administration and Service Corps of Retired Executives for free advice. Whether your business is new or established both the SBA and SCORE are excellent sources for free consultations. Why pay a consultant in a $1,000 suit when you can get free advice?

n  Inquire at local colleges about business school courses that require students to advise small businesses. Many students enrolled in a business program are required, as part of their course work, to conduct a project that advises a business. You’ll be pleasantly surprised at the fresh look these students will provide when analyzing your business problems.

n  Suppliers can provide valuable advice on growing your business. Entrepreneurs and small business owners lack the resources that large companies have to stay abreast of new developments in their industries.

Don’t overlook a great free source of crucial information on what’s going on in your industry from your suppliers. 

They have a vested interest in your success, so they’re happy to provide advice on any number of critical matters, such as what your competitors are up to and new products and services on the horizon.

n  Join your trade association. You’ll get more than your money’s worth by joining the association representing your business. If you hope to succeed, you need to keep up-to-date with all the happenings in your industry.

Take advantage of all the services they offer. Many of them offer the benefit of low-cost health insurance.

n  Join your customers’ trade association. I bet you never thought of this one, but it’s a great way to spend money to make money.

It’s a good way to establish contacts with prospective buyers, and to understand their problems so you can meet their needs before your competitors.

Despite what our current financial world looks like, you still have to make a living for you and your family.

Don’t worry about where the stock market is going, just keep your eye on your business and your finances.

The secret to weathering the hard times is to just never give up!

You may not be able to take those giant steps toward what you’ve set as your goals, but just like the hare and the tortoise race — if you keep putting one foot in front of the other and tackle each day as it comes, you’ll make it to the finish line.

In my next column, we’ll take a look at the final 12 tips to complete our set of 36.

Maureen Stephenson is a local author and owner of Santa Clarita-based REMS Publishing & Publicity. Her column represents her own views and not necessarily those of The Signal.

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