100+ Ways to Leverage Business Expenses And Increase Your Profits

Payroll 1. Cut back principals' salaries. Pay yourself last, after paying all other expenses. Although this may seem obvious, many companies have developed serious financial problems because the owners kept taking out large salaries. 2. "Lease" your employees. Instead of laying off an experienced secretary, lease him or her to another company until business picks up again. 3. Change from a weekly pay period to a biweekly pay period to give you breathing room and give you more days of interest. 4. Use temporary help whenever possible when your business substantially increases. You can first let go the temps, then the permanent employees. 5. Use part-time support staff. They don't require benefits and usually have more flexible hours. Laying off a part-timer, or cutting back their hours, is much easier than a long-term loyal, full-time employee. 6. Have a cost cutting brainstorming session with your associates and support staff. If you're working alone, set up a lunch with your accountant or other business owners to swap ideas. You'll get many ideas you've never thought about before. 7. Use an outside payroll service such as Paychex , ADP or other payroll companies to cut bookkeeping payroll costs. Or, do it yourself by using a simple software program like Quickbooks. Don't use a CPA to do your bookkeeping. (Or use Mint.com) 8. Broaden staff responsibilities/Cross Train. For example, instead of paying an outside bookkeeper, have your secretary do it. If you have to lay off a full-time secretary because your work has dropped, consider letting a less experienced associate do part-time clerical work. At least they'll have some income. Instead of having outside firms do janitorial and delivery services, have your employees do it. It's better than getting laid off, or sitting around worrying about getting laid off. 9. Cut your FICA and FUTA by setting up non-cash compensation, such as a "cafeteria" benefits plan with such benefits as health insurance and paid time off. 10. Use college interns or co-op students for research, setting up databases, etc. They work for credit or a low salary on a short term basis and can work on specific projects, or on general research. 11. Get free or low cost consulting from a local college business school's small business consulting programs, or the SBA's SCORE (Senior Corps of Retired Executives) program. They can give you advice on such topics as marketing, collections, and cost accounting. 12. Changing monetary incentive or perks program to reduced or non-monetary incentives for employees. 1 www.Sapientbizsolutions.com

a. Change bonuses to other non-monetary incentives (i.e.: gift certificates, recognition, corner office, CalPerks, etc.). 13. Use reward points from credit cards to fulfill needs for the organization. a. I.e.: Buy a new printer with points, buy gift cards to use for incentivizing employees, etc. 14. Train employees to be more efficient with time, effort, resources and money. a. Instead of hiring a manager or additional employees to meet the needs of the business, thereby incurring more expense, train employees to leverage their time, talents better to accomplish more (i.e.: 80/20 rule, etc.). 15. Find interns to work in your industry who will work for free. a. Use an internship program from an accredited school with liability insurance coverage. 16. Convert pay scale to a commission based, or a per diem (per item) system. a. Works for new hires, sales positions, collections, etc. 17. Hire all new employees as part-time or temporary employees. a. Saves money on benefits. 18. Recruit employees for temporary work through a temp agency.

Insurance 19. Review coverage - Check for unnecessary or repetitive coverage. 20. Negotiate rates. 21. Increase deductible. 22. Lower coverage for employees. 23. Ask employees to pay more for coverage. 24. Establish health savings accounts for employees. a. Set up a so-called flexible spending account, which allows your employees to pay their share of health-insurance premiums and unreimbursed health-care expenses with pretax dollars. A flexible spending account could save employees 20 cents to 35 cents on the dollar, because state and federal income taxes and Social Security taxes are not imposed. b. Moreover, the company saves by reducing the employee's base salary on which it pays Social Security and other taxes. Hire an outside payroll 2 www.Sapientbizsolutions.com

accounting firm to handle the paperwork. You can pay the service fee and still come out with a net savings. The monthly administration fee would run between $2 and $5 per employee. 25. Change to an HMO. 26. Join a group - business associations (Chamber of Commerce). 27. Bundle/Split insurance for a discount. 28. Be sure you're not overpaying for workers compensation. If your insurance company insists on classifying them in a high rate category, change insurers. If this year's workers comp is based on last year's employment, be sure to notify your insurer if this year's payroll is expected to be lower. 29. Transfer your employees to a professional employment organization and have them leased back to you (reduces worker's comp insurance premiums). 30. If justifiable, make employees shareholders with responsibilities commensurate with stock ownership (Owners are not required to carry workers compensation insurance). 31. Separate your low and high risk employees into separate entities. Must be done correctly. 32. Look at your auto insurance coverage. Consider dropping collision on older vehicles. If the car is only worth $1,500, why pay $200 per year extra for collision? 33. Raise deductibles on such coverage as auto collision, disability, property/casualty, and liability insurance. For example, have disability insurance "kick in" after 90 days instead of 30 days.
34. Evaluate all your insurance policies for their risk/benefit, and decide which ones

you think you will really need. Don't overinsure. Cost of Goods 35. Negotiate a temporary discount for period of time. 36. Negotiate flexible terms - More expense during busy months, less expense during slow months. 37. Outsource - manufacturing and distribution. 38. Do not make it in-house - outsource and drop-ship. 39. Dollar Cost Average - Buy expensive items while getting discounts on others. 3 www.Sapientbizsolutions.com

40. Get discount for large order and sell excess merchandise to competitors/or eBay. 41. Large purchase with group or association - I.e.: Chamber of Commerce, associations, etc. Utilities 42. Cut the landline - Use Voice over IP (VOIP), cell or SKYPE. 43. Use an Internet faxing service. 44. Obtain a Free energy audit from the electric and gas company. 45. Use LED lighting (long term strategy - buy used for a discount). 46. Use dimmers. 47. Lights, Toilets, Appliances, etc. (Reduce waste by shutting down lights, and appliances, and plugging leaks). 48. Go paperless. Professional Services 49. Trade or barter services (still a taxable event - must be reported). 50. Form Joint venture or affiliate relationships. 51. Trade favors. 52. Find prepaid services (Legal, etc.). 53. Do most of the work yourself, and have a professional review. 54. Outsource to another state or country - better economy of scale. § www.elance.com

Tax minimization (For educational purposes only. Please review with your CPA or accountant) 55. With the economy down many businesses may show a loss, if this is the case make it a big loss. Typically, net-operating losses can be carried back two years and forward twenty years. However, for years ending December 31, 2009, you can elect to carry back the loss three, four, or five years, whichever has the largest income. Logically you would carry the loss back to a year in which you 4 www.Sapientbizsolutions.com

had high of taxable income. The good news is the Internal Revenue Service will not only send you the refund, they will also pay you interest on the money refunded. 56. Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. This reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages. a. In addition, for each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns. 57. Worker credits: A business may claim a Work Opportunity Tax Credit (WOTC) of up to $2,400 for each worker hired from one of several disadvantaged “target groups.” The new law creates two new groups eligible for the WOTC. For workers hired and starting work in 2009 or 2010, the WOTC covers unemployed veterans and “disconnected youth” between the ages of 16 and 24. Note: To be eligible for credits, workers must be properly certified. 58. Bad business debts: In these uncertain economic times, a business may have difficulty collecting some debts. As a general rule, the bad debts of a business may be deducted from gross income when they become worthless. Business owners should keep records of all collection efforts, such as letters, phone calls, e-mail communications and collection agency activities. This documentation can support deductions based on the worthlessness of the debts. 59. If you are repositioning your business, it may be time to get rid of inventory that isn't selling. Evaluate whether you have enough revenue to write off bad inventory now and get the full write-off or whether you'll have a loss either way, in which case you might as well get rid of the duds now. 60. You can elect to expense (deduct) up to $250,000 in the year of purchase of non real estate purchases under Internal Revenue Code §179. 61. Utilize a combined accounting method to access the best tax benefit by requesting permission to use a hybrid (cash and accrual combined) method from the IRS.

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62. Structure the business as a C-corporation and be taxed after paying business expenses; then generate enough necessary business expenses that results in no net income tax. 63. Structure the business as a C-corporation and get higher fringe tax benefits including higher retirement and insurance deductions. 64. Establish a retirement plan and Health/Disability/Life Insurance benefit plan to fund in order to directly benefit from revenues yet reduce tax on accumulated earnings. 65. Use retirement plans as incentives for certain employees (instead of a raise or cash bonus) and reduce FICA and FUTA tax. 66. Defer owner's salary, and instead borrow tax-free from the organization versus taking a salary or bonus (reduces FICA and FUTA tax) Must be done correctly. 67. As an S Corporation, split compensation between salary and dividend distribution. Take a small salary that keeps you in a low tax bracket, yet also receive qualified dividend distribution (helps minimize FICA and FUTA tax; just make sure you pay yourself a reasonable salary). 68. Have the organization cover most necessary costs (car, home office, cell phone, travel, meals, training, education) and take a small salary that puts you in a lower tax bracket. 69. Have all employees convert to independent contractor status, and establish corporate entities for themselves. Pay a fee to these corporation for services rendered (Avoids HR liability and SS taxes). Must follow IRS rules on independent contractors. 70. Capitalize the organization with a mixture of debt and equity in order to benefit from the deductible interest payments and leveraged use of capital, as well as deducting the expense paid by the credit card, while paying it off gradually (for cash method taxpayers). 71. Purchase real estate or other appreciating property (in a sole member LLC owned by the C-corporation) that generates depreciation that can be used to offset the C-corp's income.

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72. File a consolidated tax return with an affiliated corporation that carries business losses or depreciable property to offset income. 73. Reduce tax on accumulated earnings by financially supporting other affiliated start up ventures for the organization, and deduct or capitalize the expense. 74. Invest cash reserves in tax-free liquid investments (i.e.: tax-free municipal bonds) or in tax advantaged investments (i.e.: REIT). 75. Give shares of an S Corp to younger generation to produce a blended tax rate for the S-Corp. This way you can give money to the next generation while reducing the tax rate for the company as a whole. 76. Give away property that you have fully depreciated (no more deductions available) to an irrevocable trust. Have the trust lease back the property to the business and continue anew to receive deductions on the lease payments for the fully depreciated property. 77. Depreciate 100% of your real estate by separately titling the building ( depreciable and deductible) to the business and the land (non-depreciable and non-deductible) to a trust. Have the trust lease the property to the business thereby making the lease payments deductible. The result will be a full 100% deductible asset.

Travel 78. Hold remote meetings over the web (webinars, webconferencing, etc.). 79. Utilize conference calls to reduce travel. 80. Send one person to a conference and have them report to the rest.

Purchasing 81. Make negotiation part of your language. a. "Can you do any better than that?" b. "What can you do for me?"

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c. "What kind of discount can you offer me?" d. "I've been a loyal customer for years. Are you offering any special deals for new customers that I should know about?" e. "Is this the best you can do on the price?" f. "Does this item go on sale any time soon?"

g. "Do you have any of these in the back that have been returned?" 82. Negotiate all loan terms and interest rates every year, semi-year or quarter. 83. Negotiate all insurance premiums yearly or quarterly. 84. Negotiate all vendor pricing. h. Pit vendors against each other - nicely. i. Get three quotes.

85. Negotiate all rental agreements. 86. Negotiate all purchases (train staff to always ask for a discount). 87. Get three quotes and share them with your vendors.

Accounts Receivables 88. Collect before service. 89. Change timing of bill. Give bill at time of service. 90. Incentivize clients to prepay an entire year (I.e.: add on bonus or discount). 91. Front load the collection process by sending statements out right away. 92. Make it easy for your clients to pay you (I.e.: send a self-addressed envelope). 93. Build a cost for your clients to use financing. 94. Make payment automatic through auto-debit of their bank account. 95. If appropriate, take credit cards. 96. Let them finance the purchase with your company (Additional profit center). 8 www.Sapientbizsolutions.com

97. Break the sale down into two or more payments. 98. Have a payment plan, yet incentivize your client to pay in full (I.e.: Discount, or bonus). 99. Hire a collection service. Administration 100. 101. 102. Use software to schedule your appointments for you (Genbook.com, etc.). Hire a virtual administrative assistant. Use a virtual office.

103. Get a remote server and intranet so that personnel can work remotely (No office).

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