The Biggest Ways Your Small Business Wastes Money

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Finances are often one of the main concerns for an owner of a small business. Capital will be crucial for getting a company off of the ground. Once it’s launched, prudent financial management will be necessary to keep a company in the black. Because many small-business owners have limited resources, saving money and eliminating waste should be a priority. It’s possible to cut corners in many different areas of a company, and some may even surprise you with their simplicity and effectiveness.

Over-Budgeting

A business budget is important for the success of any company. A budget estimates revenue coming in while offsetting it with anticipated expenses. The budget helps an owner plan for expenses to ensure that the company has enough capital to cover business operations. Over-budgeting involves allocating more money for operations or expenses than is available to spend. This situation can be perilous for a small business because it involves spending more than current revenue allows. To resolve an over-budgeting situation, examine the budget and reduce spending amounts to bring expenses in line with revenue. Some of these reductions may be temporary until revenue increases, while other reductions might be permanent adjustments to conduct business operations in a more economical way.

Wasting Supplies

Wasting business supplies can be a pervasive type of loss for a company. For example, paper waste can be significant. Instead of circulating hard-copy memorandums among employees, use email to communicate information. Recycle paper or reuse it to make scratch pads. Set printers and copiers to use less ink, and make two-sided copies instead of single-sided copies. Update customer mailing lists to ensure that the list of customers is current. Reuse and recycle boxes and packaging for shipping.

Equipment

Office equipment is a necessary expense, but there are ways to cut corners and save money with these purchases. Instead of buying new equipment such as printers, copiers, phones, and computers, explore purchasing refurbished items. These items often have manufacturer warranties, and they serve a useful life in an office at a reduced price. You might also lease equipment instead of purchasing it. Place rechargeable batteries in electronic devices, and purchase recharged ink cartridges to save money.

Wasting Energy

Small businesses can focus on energy usage to cut costs and save money. Turning off equipment and lights when not in use is an effective way to reduce expenses. Installing newer appliances may save money because they use less energy. Install a programmable thermostat to control temperatures, which can help reduce heating and cooling costs. Use lower-wattage light bulbs in light fixtures, or install compact fluorescent bulbs instead of incandescent light bulbs.

Overpaying Insurance

Insurance is one of those unavoidable expenses, but business owners should periodically review their coverage to avoid overpaying for it. Insurance coverage is protection against losses that you cannot afford: To use insurance in a cost-effective manner, don’t insure against incidental losses that you can manage without help. Set policy deductibles as high as your budget allows to reduce premiums. Review policies to ensure that you don’t have an overlap in coverage. Shop insurance companies and coverage periodically to compare policies and premiums. You may find that you can save money by switching to a different insurance company.

Overpaying Taxes

A small-business owner can unwittingly overpay taxes, which can result in significant financial loss for a company. Overlooking tax deductions available to a business owner could result in the overpayment of taxes. Often, a small-business owner might not know about tax deductions and so doesn’t take advantage of them when calculating income tax due by the company. Other times, a business owner might not maintain detailed records of expenses that would enable taking these deductions. Hiring a tax expert or accountant to assist with record-keeping and income taxes can be invaluable for saving money in the long term.

Author: Marc Marin