If you’re a small business owner, you know that some expenses draw income back into your company, while other costs do not.
When new product arrives at your store, it has the potential to pump cash into your business. The money you spend on office supplies, rent, insurance, and other overhead costs, however, doesn’t flow back into your bank account.
While overhead expenses don’t directly produce income, they are still an integral part of operating your business. Wouldn’t it be nice if you could devote less money to overhead?
Spending less on overhead means you can put more funds toward growing your company. Reducing your overhead expenses starts with looking at how you manage your money. Patterns in your accounting books show what spending areas you can improve.
Have you examined your overhead expense records lately? Take a look at your books and try these three simple accounting hacks to reduce costs:
1. Separate your personal and business bank accounts.
When you move out of your parents’ home, you have to separate your stuff from everything else in the house. You end up packing things that aren’t yours. Other things get lost.
If you use one bank account for all your finances, filing taxes might end up like your first big move. You accidentally report expenses that aren’t business expenses, and company transactions get lost in your bank statement.
A bank account dedicated to your business can cut down accountant overhead costs. Separating personal and business transactions when you file taxes takes a lot of time. If your tax preparer charges you by the hour, your joint accounts could significantly increase your bill.
When you use a bank account just for business purposes, you don’t have to separate your statement line-by-line. By organizing your records, your accountant can focus more time on maximizing your tax refund. The less time you spend with your accountant, the more overhead expenses you avoid.
A business bank account is a great tool because itemized transactions help you project cash flow. You project cash flow by comparing your income and expenses. Your projections can give you a platform for financial decision-making.
2. Move your financial records to the cloud.
As humans, we like to have physical objects to connect the dots of abstract data. Think of how much more effective a 3D model is compared to a blueprint. Actually holding representations of facts and figures in our hands helps us understand information.
But physical objects cost money and take up space. If you’re holding onto hard copy financial records, you might want to switch to cloud accounting software.
Moving your information online cuts down overhead costs including storage space and office supplies. You can find online accounting software for a low monthly subscription, usually for less money than just two reams of paper.
Cloud accounting software digitally streamlines your records. Online programs reduce the work of filing documents, finding records, and maintaining the space you use to store financial information.
3. Know when to splurge on your overhead expenses.
Smart money management doesn’t always mean choosing the cheapest route. It’s knowing when to invest in expenses that add value to your business. The occasional overhead splurge on an accountant could save you from a financial mistake.
Unless you’re a finance professional, you might want to have an expert explain the information kept in your books. An accountant can compile financial statements, file your taxes, and give you advice.
There is power in gaining knowledge about your finances. Understanding your company’s accounting helps you choose the best money-making (and money-saving) options for your business. An accountant can create a complete picture of your business’s finances.
Overhead expenses can be kept in check if you stick to these accounting hacks. You can take control of your overhead expenses with simple strategies for the way you manage your accounting.