Businesses of all sizes contend with the perpetual dilemma of how to maintain the quality of their goods or services while reaping healthy profits. While small businesses tend to receive abundant financial advice and large corporations are notorious for their cost-cutting measures, medium-sized businesses often overlook the savings opportunities available to them.
From easy eco-conscious practices to lucrative tax incentives, here are five strategies that mid-sized businesses can use to boost their net profits by saving money:
Hire strategically to reduce payroll expenses
Paying employees constitutes one of the most significant expenses that any business faces. How can employers attract and retain talent without offering generous salaries that cut into their bottom lines? Solutions include delegating some duties to independent contractors—which avoids the need to offer full salary and benefits—and hiring entry-level employees or interns. While hiring individuals with limited experience may seem risky, it can result in a mutually beneficial situation in which the employer saves a great deal of money by paying a lower salary and the employee gains much-needed work experience. Another option for offsetting payroll costs is to hire candidates from the Work Opportunity Tax Credit (WOTC) target groups, which include veterans, recipients of government assistance, and summer youths. WOTC represents up to $9,600 in tax savings per qualifying employee hired.
Barter with other businesses
Small and medium-sized businesses tend to operate less formally than large companies, which may allow them to obtain the goods and services they need through bartering. When two businesses determine that they have complementary needs and can mutually fulfill them without paying cash, the exchange often results in cost savings for both.
Adopt sustainability as one of your business values
There are several simple steps that businesses can take to “go green,” benefitting both the environment and their bottom lines. For example, encourage employees to turn off the lights when they leave a room and unplug electronics when not in use—devices can consume electricity (and drive up your electric bill) even when they are powered off. To save money on office supplies, embrace digital mediums instead of paper as much as possible, and consider allowing employees the option of telecommuting.
Replacing older appliances with newer, more energy-efficient alternatives is a powerful way to substantially reduce utility expenses over time. Easy examples include replacing incandescent bulbs in an office building with LED lighting, and installing motion detectors to turn lights off when no one is in the room. Building owners can offset the cost of some of these upgrades by claiming the §179D deduction, which equates to tax savings of up to $1.80 per square foot.
Buy used furniture and equipment
Recycling is not just for paper and plastics. Businesses can purchase a wide variety of used office furniture and equipment at significantly lower prices than their brand-new counterparts. Many of these items are available at furniture consignment stores and retailers that specialize in used office supplies. As an alternative, businesses with limited funds should consider leasing office furniture rather than buying it.
Consult with tax professionals to maximize tax savings
Armed with teams of tax experts, large corporations are adept at diminishing their tax burdens by seizing every available incentive. Smaller and medium-sized businesses, on the other hand, often forego the savings opportunities available to them because they mistakenly assume that they will not qualify. In reality, several valuable tax incentives reward the routine activities of businesses of any size. In addition to WOTC and the §179D deduction, recent changes to the Research and Development (R&D) Credit have made it more available to newer and smaller companies. The R&D Credit offers generous tax savings to businesses—including architecture, engineering, and manufacturing firms—that can show that they engaged in qualifying research activities.
Looking for ways to cut costs and boost your net profits through tax savings? Contact the experts at CRG today!