How would you characterize your small business’s financial position?
If you’re not completely satisfied with how things are going, you’re not alone. Running a small business is a game of inches — a constant struggle for slight advantage.
Followed faithfully, these five straightforward tips can help shore up your company’s finances and create opportunity where none existed previously.
1. Professionalize Your Home Office
Do you work from home part or all of the time? You might benefit from a more intentional approach to home officing. According to IRS guidelines for the home office tax deduction, you may be able to deduct a portion of your expenses directly or indirectly related to the use of a home office if your office meets two criteria:
- You maintain “regular and exclusive use” of the office for business purposes
- The office is your principal place of business
Check with the IRS and your tax professional for more details.
2. Apply for a Credit Card
The benefits of good credit are too numerous to name. Most importantly for your company’s bottom line, your credit score is inversely proportional to the interest rates you’re likely to receive on business loans and lines of credit: the higher your credit score, the lower your likely rate. If your credit isn’t where it needs to be, start with this list of the best credit cards for bad credit and build from there.
3. Trim Utility Costs at Home or the Office (or Both)
Whether you work out of a home office or suite of your own, work on reducing your utility consumption. Turn the thermostat down on cool days and up on warm days, or invest in a learning thermostat — good for 10% to 15% in saved heating and cooling costs, per Nest. Conduct an efficiency audit and follow through on its recommendations. Replace outdated appliances with more efficient models. Install low-flow plumbing fixtures. Once the upfront costs are in the rearview, you’ll enjoy better cash flow for years to come.
4. Use Cloud Software for Rote Business Processes
Most low-overhead service businesses have no need for in-house legal counsel, HR, or accounting. You can easily replace these vital services with cloud-based software programs backed by human expertise. Intuit, for instance, offers an impressive suite of accounting and tax prep software. Cloud-based legal platforms like LegalZoom can handle basic business law matters, though more complex issues do require human attorneys.
5. Reinvest Your Profits
Many entrepreneurs treat their businesses’ finances as inseparable from their personal finances.
For tax purpodses, this may well be technically true, depending on your legal business structure. (As always, consult a tax professional.)
For practical purposes, however, it’s not always a smart play. When you allow most or all of your business income after expenses to flow through to your personal bottom line, you miss out on the benefits of a financial safety net. Consider reducing your salary or distributions and keeping more of your revenue in your business bank account, where it’s easier legally and logistically to plow back into your business.
Never Stop Trimming
These aren’t the only five ways to shore up your small business’s finances and ensure that it remains in sound shape for the long haul. If you’re looking or more expense-cutting ideas, join a business peer group or seek out an experienced business coach. Another set of eyes on the problem — or several — never hurts.
