When was the last time you really spent some time reviewing all of your business expenses? I really do mean all of your business expenses. We do a lot of bookkeeping for clients in our office, and while it is not necessarily the bookkeeper's job to question what expenses are paid, we have learned that many businesses today seem to consistently waste money in a lot of the same places. So, here is our list for you to compare to your expenses. These do not apply to everyone, so our objective is just to provide a platform to help you think about you own business expenses.
Software as a Service Fees
Software has become a service based model where instead of buying the right to use software, we "lease" the right to use software. Businesses have accepted these fees as part of the cost of doing business; however, when was the last time you actually evaluated the value of the software to your business? Is the fee saving you time? Is it saving you payroll costs? Is it helping you market or sell to your existing and new customer base more efficiently? Are you even using the software? Yes, we have seen when customer was not even using the software anymore.
With online platforms providing more comprehensive feature listings, you should compare the features of your various subscriptions and determine if you are paying for duplicate services.
Further, some software firms will give you the option to buy the software for perpetual use. For example, I recently had a client paying $63 per month for QuickBooks online. He does not need to share the account with another employee nor does he need to access it remotely. Desktop QuickBooks costs about $299 for a license, and it will last as long as your operating system if you do not use the payroll feature. So, $900 per year for QuickBooks Online or $299 total for at least four years on QuickBooks Desktop. To me, $299 for 4 years (desktop) versus $3,600 for 4 years (Online) is an easy decision to make when you do not need online access to your books.
Merchant Account Fees
I am a little old-school as it relates to credit cards, and I fail to see the point to actually encouraging your customers to pay by credit card by emblazoning this on your invoice. Voluntarily taking a cut of 1.75% - 3.25% to get paid right now just does not make sense to me. I know some businesses (retail, online sales, etc) have to accept credit cards for most transactions, but at least take some time to shop for better processing fees at least once every couple of years. Check online for some non-traditional credit card processors.
As an alternative, try to encourage other forms of payment such as cash, check, or debit cards.
Print advertising is the most expensive form of advertising. With no offense to the phone companies, when was last time you looked up a business in the phone book? While it is sad to see that newspaper readership has declined, this is still an overpriced method of advertising. Billboards, mailing postcards, and flyers are still very expensive forms of advertising.
Try alternative sources to reach your customer base. Facebook, Twitter, and Linked In offer basically free advertising and exposure for your business. The paid ads on these platforms are relatively inexpensive, and they can be targeted directly to your demographic. Google my Business is also a very important source of relatively free advertising. The account set up is free, and you can make periodic posts that help your SEO investment.
Travel, Meals, and Entertainment
Business should consider using online meeting platforms to cut down on travel costs. Most business owners and customers seem to be just fine with a virtual meeting when conversation is the only reason to meet. Entertainment costs come with a double hit since these costs are no longer deductible. Meals continue to be an expensive option for generating business since most are just fine sitting down at the desk or a conference room. And finally, employees tend to abuse the privilege.
The single biggest mistake when it comes to staffing is having too much staff idle time. This is particularly a problem in restaurants and retail stores. Time should be taken to evaluate customer traffic patterns to efficiently schedule the right amount of staff. Consider outsourcing certain business functions that really do not create the need for another staff member (e.g, human resource compliance, accounting, janitorial services, and the use of temp employees).
Brick and mortar is one of the most expensive business decisions you will make. Is it really necessary for your small business to be on the most expensive street corner in town? Professional service firms should consider offering work from home for some staff prior to expanding office space. Some employees love this option, and it saves the business rent, utility costs, and insurance premiums.
Out-of Pocket Costs
Many professional service firms incur out-of-pocket costs in servicing their clients, and while they may track these costs, some tend to get overlooked in the monthly bookkeeping. It is important to develop internal procedures to capture these costs. I have found the easiest way to track these costs is to make one person responsible for the organization of these costs, and to make entries in the time keeping system to note the costs incurred. Another effective method is to upload a .pdf of the receipt to the bookkeeping system (or timekeeping system) to match the related expense. Whatever method you choose, it is important to get a handle on these costs.
Bank and Credit Card Late Fees
Bank insufficient fund charges, late fees and interest charges on credit cards are a common money drain. Bank charges and NSF fees are most commonly associated with not keeping your books updated in a timely manner. Credit card late fees and interest are sometimes unavoidable if you are using the credit card to manage cash flow; however, the late fees can easily be avoided by setting the account up to pay at least the minimum (if not the full balance due) by the due date every single month. I recommend you pay more than the minimum, but the automatic payment will at least avoid the the late fee charge.
I have learned this one from personal experience. Using outdated technology can cost substantially more than the cost of a new desktop computer, laptop computer, printer, or copier. Outdated technology is generally slower, requires more staff downtime to deal with technology problems, expensive service technician repairs, and possible cybersecurity risks.
Considering that many people now have cell phones that cost more than the cost of an excellent computer, there is really no reason to avoid updating technology on a regular cycle. Consider the 2016 State of the Workplace survey estimated global businesses lose 1.8 Trillion per year on outdated technology. Microsoft has repeatedly stated that outdated equipment and software greatly increases the likelihood of a malware attack.
Investments in new technology will generally increase staff productivity, reduce your risk of cyber liability, and reduce maintenance costs.
We encourage you to use the categories as a guide to evaluate your own business expenses. Each business is different, but taking a little time once a year to evaluate the monthly expenses will often make a difference in the bottom line next year.
We are located in Lubbock, TX, but we serve clients throughout the state. Join the conversation on Facebook @bradleysmithinc.