In today’s economy all size businesses need to watch every penny. Are you guilty of spending money you do not need to? I would like to help you to check things you may not think of or because they have always been done that way.
- Check your insurance, make for sure you are not over-covered and under-covered. Workers Compensation is one I have always checked at every company I have worked for. It can be confusing but someone needs to truly understand where each employee is listed for WC. Office workers are one of the lowest rates, make for sure people who are doing paperwork such as people in purchasing, partial wages for people doing 2 jobs, etc. Yes you can put them 50/50 or other separation if this is the percent they are in the office compared to doing more dangerous work. You need to understand what each person does and what percent of time is spent on each activity. This can be a big money saver. Office is only one example so please check each employee and how they are coded. Also keep accurate records of overtime, you pay WC on normal rate of pay not overtime rates. Always double-check the workers compensation audit and make for sure you are in agreement.
Timeclock – some small businesses may not like this idea but this is costing them every day. There are several ways most time clocks can round time up and down. Say someone comes in late everyday by 8 minutes, this equals to 1/4 hour per day. Let’s say this person also leaves early by 8 minutes per day, another 1/4 hour. Let us assume he works 40 hours every week and makes $10 per hours.
daily = 1/2 x $10 = $5 per day extra
weekly = $5 x 5 days = $25 per week
yearly = $25 x 52 weeks = $1,300 per year.
Now this is only one employee, depending how many you have, this can add up quickly. I know this is not perfect science but an average, not including lunch times or overtime. As you can see the numbers can raise significantly.
There is also another perk to the time clock. Say you fire an employee for any reason and they call Wage and Hour for your state. Guess what, they go by what the employee says they did not get paid for, unless you have a time clock to match to paychecks. It only takes one to say they worked and did not get paid for overtime. You have to pay this terminated employee, then the state could audit your records for everyone back for 7 years.
- I normally recommend a payroll service and let me explain why. All taxes, payroll checks, come out at once. Companies such as ADP have been doing this for years and guarantee taxes are paid on time or they pay penalties and interest. I have had several companies that had a bookkeeper completely competent of running payroll and paying taxes, but the bookkeeper did not pay the taxes. The company gets money stolen they thought was going to taxes and when they find out about the missing funds, it may be too late. The company then pays the original taxes, interest, penalties, which could bankrupt a small business depending on how long this has gone unnoticed.
Now I want you to look at things that have always been done that way. Buying stamps, buying office supplies, etc. If anyone is taking stamps a postage machine will pay for itself. Also when you guess at the postage you are overpaying, this machine will weigh it and print the stamp. This will also save time because you do not have to run and buy postage or get things weighed, everything can go in the mail box or picked up by your mail person.
What about items such as paper and pens? Is one person responsible for ordering or does everyone just order what they want. Everything should be kept in one place and one person responsible. This person would order and notice if too much or not enough of things are kept on hand. Places such as Staples, Officemax, etc have reward programs or company special pricing that could save you money. Plus they offer free next day delivery with a minimum order.
Are there items you give your customers for buying big ticket items? Have there been changes recently where you are giving them 2 or 3 things instead of just one. Have you thought about giving them a small gift card/discount for your business? It brings them back in and it does not truly cost the amount you give away. Something to keep in mind is this is a cost of goods rather than advertising or office supplies. When you account for everything when you sell things you will get a true profit margin and not charge things to expense accounts that are split between departments.
All businesses need to step back and take a look at all expenses. I do not mean start chasing every ink pen, but if office supplies expense has increased by a large amount over the last 5 years, take a look with new eyes, you never know what you may find. Apply this to every department including employees time. Can you lower hours worked on slower seasons, instead of people sitting doing nothing. Also do not be afraid to ask for a discount from your vendors, especially if you buy a lot from some companies. Just think what 10 or 20 percent discount could do for your bottom line.
This does not include everything to look at but if you compare your income statement from one year to the next, and look at 5 year comparison something may jump out at you.
Another way of watching is your budget. It does not have to be perfect, especially at first. Compare numbers to monthly budget and yearly budget. You can catch things a lot quicker.
As always I recommend using a CPA office of your choice, they can help you with this plus lots more.