Small businesses may be making great contributions to the U.S. economy, but their financial health is in critical condition. According to a 2016 JPMorgan Chase Institute study, most small businesses only have 27 days’ worth of money on hand to cover expenses if inflows stopped. Essentially, this means that many small businesses are operating on a month-to-month basis and doing their very best to continue growing their business while building up their cash reserves.
What can they do to better this situation? More often than not, entrepreneurs who want to save money are told to penny pinch their way to financial freedom. This means maintaining a strict financial diet for professional and personal spending alike, DIY-ing as much of their workload as they can instead of outsourcing or hiring new employees, and calculating every receipt received within a 30- to-31-day timespan to evaluate the month’s spending performance. There’s nothing wrong with the penny-pinching approach either… But it does take a lot of resourcefulness since you’ll likely be pinching those pennies for months – maybe even years – to come.
Not sure if this approach is the right one for you? Here are some often overlooked ways you can build your savings without making too many sacrifices on yourself or your business.
Reevaluate your financial projections
How much should you be saving each month so you’re living month to month with your business? Or better question — how much can you actually save each month? If you don’t know, it’s time to reevaluate the financial projections of your business plan. You likely established this section early on with estimates of your cash flow or maybe even a look at the flow when it was higher in the beginning than it is now. Review your current cash flow, along with the sections that tie in with your profit and loss and expenses budget to get a feel for how much you can begin saving up.
Track your write-offs
Consider all of the “ordinary and necessary” expenses your business has for a moment. These may include business insurance, and office expenses like cleaning maintenance, travel, and office supplies you use and replace. These are all eligible for write-offs during tax season and should be tracked accordingly. Even as tax season winds up for this year, it’s a good idea to start tracking these expenses now for next year. Just keep in mind that not every expense qualifies as a deductible one, so be sure to check in with the IRS on a regular basis to see what does and doesn’t.
Cross-train your employees
For many startups, running a lean business means having an even leaner staff where everybody wears a lot of hats. Instead of hiring tons of employees to each do specific duties, cross-train your existing employees so that they can do more than one thing at your office. This is especially helpful during times of illness or vacation in the office so that your team can step up and help one another out.
Take events and outings with partners and employees in-house
Taking partners out to lunches or meeting up for Starbucks gets expensive quickly. And taking employees out for companywide events like retreats or happy hours also gets — you guessed it — expensive quickly. What’s a small business owner to do when they don’t want to pinch to the last penny, but also want to impress potential partners and keep office morale boosted? Bring the fun in-house! Host creative team-building exercises for your staff that involve training and learning, and then invite partners over for coffee so they can check out your space and get a feel for what you do.
NOTE: This guest blog post was originally authored by Deborah Sweeney and is published with permission. Deborah Sweeney is the CEO of MyCorporation.com, which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation and Deborah at @deborahsweeney.