Owning and running a business is costly. In fact, most business owners are shocked when they see how much they’re spending in the office. Small costs here and there really add up causing business owners to spend hundreds to thousands of dollars extra every year. To save your business money and keep revenue on the rise, you must cut unnecessary costs. Luckily, there are ways that you can save money by planning ahead and taking the right steps.
Cutting Employment Costs
When hiring people for your team, you’ll either hire employees (full-time or part-time) or contractors. Contractors typically come at a much lower cost, which is why many employers prefer them for their business. Independent contractors are typically less expensive because you don’t have to pay payroll taxes, unemployment insurance, workers’ compensation, or benefit packages. Ultimately, if you’re looking to save costs for your business, you may want to consider hiring contractors over employees.
Hiring contractors is great; however, keep in mind that not all workers count as “contractors”. There are IRS rules that explain who counts as an “employee” versus a “contractor”. You can’t just call your worker a contractor to save costs; they truly have to be a contractor and work as a contractor. If you misclassify your workers as contractors instead of as employees, you may face penalties down the line.
Before you hire independent contractors or switch your workers from “employee” to “contractor” status, you’ll want to review the classification rules. Generally, an independent contractor is someone who completes specific assignments for you but functions independently for a contracted period of time. They can set their own rates and even their own work hours. On the other hand, an employee completes work as directed by the employer and is paid a salary with various benefits.
To learn more about the classification of employees, you can either check out this guide by the IRS, or you can read our article about classifying employees and contractors correctly.
Track Time Correctly
You can also cut your payroll and billing costs immensely by tracking employee work time properly. One of the biggest costs of any business or organization is payroll and billing. In fact, according to studies by the IRS, the average business in the US can face up to $845 in payroll penalties annually. When your employees’ payroll data isn’t correct, your payroll taxes aren’t accurate. If the IRS finds that your numbers are incorrect, you may have to pay up. Therefore, it’s imperative that payroll, payroll taxes, and invoices are all tracked and submitted correctly.
Tracking time correctly also tells you how much to pay employees or how much to bill your clients. If you have an unreliable time tracking system (such as on paper or an Excel spreadsheet), you can end up overpaying workers and undercharging clients. Some companies end up paying their employees an extra $600+ each year because of mistakes. When you invest in a reliable time tracking system, like Timesheets.com, you’ll bill clients correctly and pay your workers correctly.
Overtime can be extremely costly to your business if your employees are accruing it regularly. According to the FLSA, hourly employees earn overtime at 1.5 times their normal wage. They can potentially earn even more money, depending on state overtime laws. When employees regularly earn overtime hours, you will end up paying them a lot more throughout the year. To put things into perspective, an employee who earns $16/hr gets $24/hr when he/she gets overtime. If this same employee earns 50 hours of overtime in a year, they’ll end up earning an extra $1,200.
There are measures you can take to avoid having to pay employees overtime. For example, in Timesheets.com’s system, you can disable the ability for employees to clock in before the start of their shifts. This way, they’re not earning unauthorized overtime. Some employers also choose to have managers clock employees in and out. This approach ensures that managers are clocking employees in and out in a timely manner.
You must remember that you can’t avoid paying your employees overtime, even if it’s unauthorized. Under FLSA terms, you must pay employees for all hours they work, regardless of whether or not you wanted them to work overtime hours.
Remote work is a great way to reduce business expenses. Without an office, you won’t have to worry about costs associated with office supplies, rent, utilities, mortgages, and more. A study by Global Workplace Analytics states that transitioning to remote work can save an employer about $11,000 each year per employee, and each employee would save about $4,000 a year on average by avoiding commuting and other expenses. With those savings, you’ll be able to put that money back into your business and into your workforce.
Having a remote workforce also allows you to pick team members from all over the nation, which means that you can hire employees who are located in geographical regions where the minimum wage or average salary is lower. If you’re looking for employees or contractors at a lower cost, switching to a remote workforce is the way to go.
Get On the Cloud
If your office still uses paper, you may want to consider switching to online solutions. Continuing to use paper and printing materials is not only bad for the environment, but it’s bad for your wallet. According to research, printing materials can cost businesses up to 3% of their revenue on average. In other words, if your company makes about $2M per year, your printing costs would equal to about $60,000 for the year. By switching to electronic databases, you’ll avoid the need to buy ink, paper, and other in-office materials.
Hire an Accountant or Bookkeeper
Hiring an accounting professional is probably one of the best things you can do for your business. Not only do accountants keep you compliant and maintain your accounting records, but they also help you budget and plan ahead. Bookkeepers and accountants have access to your important financial data, which allows them to create reports so that you can see where your money is going. Instead of estimating how much you’ve spent or how much you’ve earned, experts can assist you in seeing your finances correctly. With this information, you can plan for the future and anticipate your costs for future investments.
Need to track your time and expenses on the cloud? Try Timesheets.com! It’s easy and reliable.