Managing your business expenses is always a complicated task. You have to make sure that you are earning enough to compensate for all the work and time that you put in. The following will help you in managing your business finances and saving some bucks to keep your operations going.
1. Be Always on the Lookout for a Better Supplier
This is a common dilemma for starters in the small business field. Of course, you want to price your products or services competitively. It’s either you go for the lowest price you can give to customers or add something that others don’t have, especially if the market is already saturated.
If the latter is not an option, then the price is the only variable you can tweak. The problem is that, sometimes, by having the lowest price, you are barely making an income. You can get hundreds of orders but barely raise a profit margin. Since it is now proven that customers like low prices, maybe you can find a way to lower your production costs.
Mass manufacturing is always cheaper in the long run than doing things one by one. This is the reason why handmade products are always expensive. If you want to keep up with the number of orders, you can invest in machinery or technology that will speed up the production.
Alternatively, you can always look for a supplier that can give you the materials at a low price. If you look hard enough, you will be surprised how much you could have saved if you immediately went to the direct supplier. You don’t need rocket science to understand that lower production costs mean you can keep selling your product at a price that many customers can afford.
2. Know How Your Taxes Work
No matter which field you are in, you need to know how the Internal Revenue Service (IRS) keeps tabs on your income. By understanding the in and out of IRS regulations, you can significantly reduce the taxes you get charged as a small business owner. The IRS has some rules that provide tax exemptions. In fact, the Internal Revenue Code can be a fun read if you like to go on a treasure hunt in the form of a legal rule book.
Take real estate investing, for example. Section 1031 of the US Internal Revenue Code allows tax exemption for like-kind property exchanges. This basically means that you don’t have to pay capital gain tax for a property you just sold, provided that you invest the profit in a like-kind property in 180 days.
For small business owners like you, there are some ways you can enjoy similar tax exemptions. For one, you can employ a family member. Yes, you can employ even your own children. You can eliminate income tax on the wage that you pay your children. Under the Federal Unemployment Tax Act, you are not required to pay for Medicare and social security for a child.
The same goes for a spouse. If they have another work, you can even set aside some money for their retirement plan if you employ them in your business.
Changing your business structure will also help you reduce taxes. Sole proprietorship requires you to pay for all social security and Medicare expenses. If you register your business as a Limited Liability Company (LLC), you may be able to reduce the tax payments in half. However, you have to study all the requirements that come with being an LLC.
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3. Review All Expenses Down to the Smallest Ones
From studying something as big as taxes to jotting down all the smallest expenses, all of these are smart business practices. The little things you spend on like packaging printed tags, you should take all of them into consideration. Regardless of whether a single tag costs less than a dollar, write it down. You can easily spend 100 dollars on these things that you are not accounting for in the long run.
Also, by having a list of all the expenses, you can review them and decide which ones you can cut down on. Anything that doesn’t provide an ROI cuts it down. You can bring in large savings by doing this little practice over time.
When you own a small business, it is vital to save as much money as you can. After all, the reason why you are in the business is to make money. Follow all these tips and see how much you can save in the following quarters.