Question: It’s that time of year where we’re planning our 2022 budget, and we’re looking for ways to minimize costs in the future. Do you have any recommendations?
A: We’re happy to hear that you’re approaching your budget before the fourth quarter. Tackling your budget early can allow you to identify areas for improvement and make intelligent and considerate choices. As CPAs and business owners we understand the complexities of running a company. When tackling your budget, managing the bottom line by reducing and maintaining overhead costs is your top priority. Below, we’ve included some options you may consider.
Consider payroll. The most significant expenditure for many privately-held businesses is personnel cost. As your business grows, it is critical to hire and develop a strong team. Many businesses have a close-knit environment where long-term employees can feel like family. Unfortunately, this emotional involvement can make it difficult for business owners to right-size the organization or make staffing changes. However, unproductive employees create additional work for efficient, productive ones. Negative attitudes and low productivity can bring down morale. You must use your payroll dollars wisely. Reward team members who are productive, provide results and work as team players.
If you have unproductive employees, you must correct the situation. Communication is key. Conduct performance reviews and clearly identify your expectations so that the employees can modify their behavior to meet your business objectives. Keep them accountable and use their time efficiently so they provide an adequate return on investment for you and your business.
Run the numbers. Regularly monitor the financial health of your business. Collaborate with a financial expert who can assist you in analyzing data to ensure you’re covering all your bases. Financial experts are usually able to identify additional money-saving opportunities and, at the same time, help you develop strategies to maximize efficiency and profitability. Understanding and utilizing your financial statements as a tool to manage your business is vital.
Reduce your tax bill. Taxes are another major expenditure for most business owners, and since the Biden administration has entered the White House, we have seen many changes to federal taxes. Consider engaging a financial expert who will brief you on current and proposed tax laws allowing you to be proactive, ensuring you are taking advantage of every tax break to which you are entitled.
Engage experts. Financial experts aren’t the only ones that can improve your bottom line. You may want to consider outsourcing some functions so that you can put more of your energy into running your company. If you spend hours each week troubleshooting computer issues, you are likely under-utilizing your strengths. Hiring an IT expert or service can not only save you time and energy but can also ensure that your computer systems are secure and backed up in the event of a disaster or breach.
Consider your hiring options. If you are finding yourself short-handed, but aren’t yet ready to add full-time employees, consider using independent contractors, temporary employees or interns. These options will allow you to determine the responsibilities and skill sets necessary for potential full-time positions or consider job share and flexible schedule alternatives.
Buying or leasing? Many businesses owners spend too much money on equipment, facilities, and other items because they do not comprehensively analyze their options for buying or leasing. The decision to rent or purchase depends on the type of item, the financing terms, and your capital structure. You should prepare financial analyses to determine your company’s best long-term interest and how your decisions impact your overall goals.
By taking the time to analyze your options well ahead of next year’s budget deadline, you can have a positive impact on your bottom line. Reach out to a trusted CPA or business advisor who can help you make the most out of your 2022 budget.
Crystal Faulkner is a Cincinnati market leader with MCM CPAs & Advisors, a CPA and advisory firm offering expert guidance and beyond the bottom line thinking for today’s public and private businesses large and small, not-for-profits, governmental entities and individuals. Tom Cooney is with Wealth Dimensions, an investment advisory firm. For additional information, call 513-768-6796 or visit online at mcmcpa.com. You can listen to Tom and Crystal daily on WMKV and WLHS on “BusinessWise,” a morning and afternoon radio show that profiles highly successful people, companies, organizations and issues throughout our region.