Everyone keeps telling us that we are in a recovery.
But the fact is, I know plenty of business owners who are still facing “headwinds”. And the natural temptation in that situation is to slash costs like a wild samurai.
So, I have some advice for you on the cost-cutting front, specifically, this week.
But before I get into it, I’d like to set up this whole notion of cutting costs, first, because there’s a “right” way and a wrong way to do it.
One of the most tempting costs to “cut” is in the area of marketing and sales.But that isn’t the place to start a purge. These are the engines of growth for your business. In times like these, you can be like a doctor who amputates the wrong limb (forgive the grisly analogy–but it fits).
And so you want to cut the *right* items if you’re facing a crunch.
Cost-cutting is a temporary measure. The way to break through a tight cashflow is to re-invent your sales process and fix the SALES problem. It’s a big reason I write these notes to my Newtown Square, PA clients and friends so that I can provide a small inspiration to you in this area.
So, with those two caveats said, here are some thoughts for you…
Stephen Venuti’s Three Tips On Cost Cutting (Part 1)
“You have succeeded in life when all you really want is only what you really need.” -Vernon Howard
This is a rich topic, and it may extend into more than two weeks’ worth of notes.
1. Use One Fixed Expense To Replace a Monthly Cost
Here’s a good example: Do you have one of those filtered water deals, where the rep comes by every so often and gives you more 5 gallon jugs? Instead of buying all that water (to the tune of several thousand dollars over the course of a year), install a filter and fill those jugs for free with water you already pay for. For a few hundred dollars, you can install a high-pressure filter to your office kitchen sink. And you no longer need to coordinate drop-off times with the water people.
You don’t have to stop with water, but that’s one way to get your mind moving on areas such as this.
2. Deduct for Tangible Assets (Section 179)
This nice little provision in the federal tax code allows business owners to deduct for certain tangible assets, such as property and equipment. The GREAT news is that a bill passed in December 2015 set the deduction limit for most new and used capital equipment, and even certain software, at $500,000 after inflation (this would be only $25,000 prior to the current law). Also, this was retroactively applied for 2015 purchases as well (did your existing accountant take this into consideration, I wonder?).
There is also a 50% Bonus Depreciation in place, for qualified new equipment purchased this year, which can also be taken by some businesses after the Section 179 deduction.
This is something you should let us know if you’d like to pursue, ASAP, as we can help you with it, directly.
3. Creative Employee Compensation
Short on cash to cover bonuses, or even payroll? Offer a few extra paid vacation days for the coming year instead. That way, you can still compensate employees for hours they didn’t work–but you don’t have to lay out all that cash in one shot. (Note: This may be a tough sell, but it’s worth a try.)
I’ve got plenty more cost cutting ideas, including some specific resources for you, but I’m trying to keep this blog post pithy and actionable, so I’ll be back with more next week.
I’m grateful for our chance to serve you and your business and we are dedicated to its success, in your bottom line, and all other measures.
Feel very free forward this article to a Newtown Square, PA business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Newtown Square, PA families and business owners. And we always make room for referrals from trusted sources like you.
Warmly,
Stephen Venuti
610-353-0686
Stephen J. Venuti, CPA, MST, LLC
