Creating a lean business in 2018 will have myriad benefits – you’ll have more money available to help you grow, and you may be able to draw out more to enjoy in your personal life. By lowering your expenses and saving money, you help to insulate yourself against fluctuations in the market. It’s a win-win.
Here are our top ideas for how you can save your business money in 2018:
1. Make sure you claim all your deductible expenses
The more expenses you claim, the less you’ll have to pay in tax. You can only claim expenses that legitimately relate to your business, but there are many common expenses – especially around home office and vehicles – that small business owners don’t realise they can claim.
If you have a home office, you can claim a portion of your home expenses as a business deduction. An example of the home expenses you can claim are; rates, mortgage interest (but not the mortgage principal) or rent, telephone, internet, insurance, power.
You can only claim the expenses that relate to the area in your home used for business. Work out the percentage of the work area, compared to the total floor area of the house. Then apply this percentage to the total house expenses.
If you are a sole trader or in a partnership and use your personal car for business purposes, you can claim the portion of expenses relating to business purposes. You can claim a portion of the running costs of the car, such as; petrol, repairs and maintenance, vehicle insurance, WOF and rego.
You must keep a logbook for three months every three years to record the distance, date and reason for the trip. If you don’t keep a log book you can claim up to 25% of the vehicles running costs as a business expense. Alternatively, you may use Inland Revenue mileage rates to make a claim on your vehicle.
Do you entertain business contacts, treat employees, or send client gifts? These can be claimed as entertainment costs. The majority of entertainment expenditure that involves staff or clients is 50% deductible, for example; food and drink provided offsite. Light refreshments, like morning tea at the work premise, are 100% deductible.
Entertainment for staff when travelling (out of town) on a business trip is 100% deductible (except when entertaining clients or contacts) If out-of-town travel is mainly for entertainment purposes, you can only deduct 50% of the cost of food and drink.
As with any business expense, ensure you keep a record invoices and receipts as well as the reason behind the expenditure.
2. Negotiate with vendors
Your vendors want to stay in business, too, and they want to keep their contracts. Many are often willing to negotiate lower prices rather than lose a regular customer.
You won’t lose anything by asking about a discount, and you may end up shaving money off your monthly expenses.
Price isn’t the only thing you can negotiate on; you may be able to source more services or better value for your money, or more favourable credit terms.
3. Outsource jobs and tasks
For many small businesses, employee costs encompass the biggest chunk of the budget – salaries, office space and insurance can quickly eat away at your bottom line.
Keep full-time staff to a minimum and outsource the rest of the work to independent contractors (if possible). Gain the benefit of someone else’s expertise, without the additional set-up costs of bringing the operation in-house.
What could cost your business a lot in set up costs just to make a low margin, may be a lot cheaper for someone else to do based on their bulk (economy of scale).
Outsourcing certain tasks – such as your bookkeeping – can also free up your own time, so you can focus on growing your business rather than running everything.
4. Be aware of GST registration for your overseas suppliers
If you are GST registered, be aware of which overseas suppliers are also GST registered and include GST on their goods & services.
As of 1 October 2016 overseas-based businesses that supply remote services (including online services) to customers resident in NZ are required to register for NZ GST and charge GST on those services. Always double check the invoice/receipt, as not all overseas suppliers adhere to this.
We find that some of our clients are still coding these transactions with no-GST, which means they are not claiming all of the GST input tax they could be. These transaction can include:
- Digital content such as e-books, movies, TV shows, music and online newspaper subscriptions;
- Games, apps, software and software maintenance;
- Online gambling services;
- Website design or web publishing services; and
- Legal, accounting, insurance or consultancy services.
If you are GST registered in New Zealand you can contact the overseas suppliers who are charging GST and ask them not to charge GST when invoicing you.
5. Go green to save some green
Going green in your business will do more than make you look good to your customers and help to save the planet – it can actually save you money.
The more energy efficient your business is, the more you’ll save on utilities. Use energy saving light bulbs, and turn off appliances at the end of the day, especially on Friday evenings. These simple changes can make a big dent in your power bill.
Go paperless – you’ll save on paper, ink, printers, and other supplies. You’ll also reduce clutter in your office, and make accessing information faster and easier.
Move to online applications – cloud-based applications let you share data easily with multiple users, such as your clients and suppliers.
- Google docs – collaborate on documents
- Dropbox – share files
- Payroll software – arrange and pay staff
- Basecamp – project management
- PandaDoc – sign documents digitally
- Xero – online accounting software
Even trying one or two things from this list could have a positive impact on your business in 2018. Go on, there’s no reason to delay.