When small business owners are struggling with cash flow, often the first inclination is to bring outside services in-house, including their bookkeeping and accounting services. When cash is tight, this may seem like an effective strategy. But is it? Paying someone internally to manage your books can actually be more costly long term. For example, if the business owner assumes this role, it can lead to less time for activities that generate income. (We wrote more about DIY Accounting in our blog post here!)
A partnership with an effective bookkeeper can be key to your company’s growth. Therefore, discontinuing that relationship should not be taken lightly. If you feel that cash in your company is tight, consider three other areas where you can reduce costs.
Advertising & Marketing
What are you currently paying for print advertising, online advertising or your website? Has it proven to be effective in attracting new business? If you are unsure, perhaps the first step is to survey a portion of your customers over the next 30 days. Ask them how they heard about your business. Then take action based on their feedback. For example, if most of them are learning about you online, perhaps print advertising could be eliminated.
For marketing, make sure you are utilizing as many free resources as possible. Social media is a free service that reaches many people. Creative agencies are especially suited to this medium. As an example, one of my friends built up her custom design studio simply by using her Instagram account to share photos and videos of her small business journey and the beautiful custom suites she was creating for clients. Social media is a powerful tool to not only promote your products and services but also build relationships with your customers.
Entertainment & Client Gifts
Many business owners enjoy showing appreciation to their customers. For many consultants and professional service providers, generating new business through recreational activities is a common practice. However, entertainment and client gift expenses can be a slippery slope if you aren’t careful. Similar to marketing and advertising, you want to regularly analyze if these activities are bringing you more business. Additionally, in 2018 the IRS vastly eliminated the ability to deduct most entertainment expenses. While they still allow deductions for gift expenses, those expenses do have a cap. You can read more about the tax treatment of entertainment expenses in our blog post here.
Of course, we aren’t saying you should remove entertainment and client gifts altogether. You want to keep your customers happy! However, you should think about when you pay these expenses and how often. They can add up!
Employee Perks & Incentives
This is the most sensitive topic we discuss with our small business clients. To be clear: We are not talking about benefits such as medical insurance or retirement plans. We are referring to those extra incentives to show appreciation to your staff. Employee perks help company morale and allow you to retain good employees. They can range from snacks in the breakroom to student debt repayment programs. Many small business owners find creative ways to let their staff know they care.
As fellow business owners (and employees), we want you to show appreciation to your staff! But you want to approach these expenses in a thoughtful manner. If your company hosts team retreats or company outings, try to create a budget for these activities and stick to it. Find creative solutions – as an example, perhaps at your next company picnic, each employee could bring a dish instead of the company catering the entire event.
Before releasing new employee perks company-wide, ask yourself these questions:
- How many total employees would take advantage of this company perk? If you’re unsure, assume all would participate.
- How much would financing this perk cost monthly? Annually?
If after looking at all three of these areas in your business you still feel cash is tight, by all means, speak to your bookkeeper. Perhaps rather than firing them, you could work out an arrangement to reduce or eliminate a few of the services they are offering. However, keep in mind that an effective bookkeeper makes it their job to help you find cost savings. We just helped you find three!