Ah, tax season. The season of scrambling for records, panicked emails to accountants, and crossed fingers. It’s natural to brace for impact at this time, but in reality, consistent, year-round expense management is key to navigating rising costs.
Proactive cost-cutting strategies for small businesses don’t have to be drastic. A few smart habits and automations are enough. Here are some budget planning tips you can use outside of tax season.
Use expense reports to reduce overhead
Your first stop on this cost-cutting strategy journey is your expense reports.
They may look like dusty data, to be deployed only during payroll or audits, but are in fact a goldmine of information about how your company is using money.
Use them to uncover patterns, identify where you’re overspending, and make informed decisions to reduce overhead. You can use expense reports to understand:
- How much your employees spend on business travel (accommodations, conference fees, airfare, etc)
- Your business mileage costs
- Compare spend year over year to track patterns
- Understand how business expenses align with goals like client acquisition, sales, customer support, etc
Tip 💡
Besides travel and other variable expenses, check in on your monthlies: software subscriptions, utility costs, insurance premiums, vendor invoices, etc. Both incremental and sudden changes in those expenses are worth a second look.
Sure, you may not be able to talk down a power bill or a software plan, but you could implement other creative solutions: like lowering your number of seats on a plan or getting a subsidy for energy-efficient appliances.
Use mileage reports to understand travel costs
If your business involves driving, accurate mileage tracking and reporting is a huge part of this equation. If you’re using a mileage tracking solution like MileIQ, your reports will automatically come with details like addresses, total mileage, and even mapped routes taken by employees.
Having easy access to these details helps you make better decisions and prevent over-reimbursement.
Optimize vendor contracts as a cost-cutting strategy
If you’ve been using a supplier or a provider for a while, it can be easy to let these agreements auto-renew without a second thought. But re-negotiating old contracts can be a great area to reduce overhead.
Make it a habit to:
- Regularly review all vendor contracts before their renewal dates.
- Benchmark prices: Are you still getting a competitive rate? Don't be afraid to shop around.
- Negotiate terms: Can you get better payment terms, volume discounts, or bundled services?
- Consolidate vendors: Could you streamline operations and potentially get better rates by using fewer suppliers for similar services? This is one of the most effective budget planning tips for sustained cost-cutting for small businesses.
Some common vendors you may want to audit include:
- Software providers: If you’re using “the industry standard” check for rising competitors with well, more competitive rates. Similarly, you may want to see if a more well-know provider could offer savings.
- Insurance companies: Even if you’re happy with your current policies, it never hurts to look for a better deal.
- Service providers: Any outsourced providers (like HR, accounting, or marketing) also merit a second look at their rates.
Consider flexible and remote work to cut operational costs
Of course, whether or not you can offer remote work will depend on your business. But not paying for an office lease or getting by with a smaller space for essential employees can be a great cost-cutting strategy. Best of all it saves you money throughout the year.
Consider the potential savings on:
- Office rent and utilities
- Office supplies and maintenance
- Commuting benefits (if previously offered)
As a bonus, employees tend to appreciate flexibility, so allowing remote/hybrid work can boost team morale while reducing overhead.
Schedule quarterly reviews for year-round expense management
Habits take a while to stick and keeping a more vigilant eye on your business spend is no different. That’s why putting quarterly budget reviews on your calendar — though probably not the most exciting thing on your schedule — keeps reducing overhead top-of-mind.
This regular check-in allows you to:
- Track progress against your budget planning tips and goals.
- Identify new areas for cost-cutting for small businesses.
- Adjust strategies based on performance and changing market conditions.
- Reinforce a culture of year-round expense management.
Tips for a successful expense review 💡
- Put a hold on your calendar for one day each quarter so you can build in space for a review.
- Identify what areas you want to focus on ahead of time (identifying over-spend, reviewing contracts, planning budget).
- Loop in key stakeholders ahead of time so people get used to regular reviews and don’t see them as a disruption.
