Last year, I wrote this post as a way to support small business owners coming out of the COVID-19 Pandemic. This year, I’m revisiting this post and updating it a bit since we’re now heading into a higher inflationary period. People are going to be looking at preserving their cash flow in their businesses and on their personal spending.
Below are some ideas that I have found to be helpful for business owners.
Tip #1 – Move To A Monthly or Quarterly Payment Plan for Yearly Expenses
By moving to a more frequent payment plan, your cash outflows are less “lumpy” and are more predictable. For instance, if you are considered to be a small supplier for GST purposes (earning revenues less than $1.5 Million), you have the option of paying your GST annually, quarterly, or monthly.
Trying to come up with a larger sum of money on an annual basis can be stressful, so you may find that your stress levels decrease by submitting your GST return on a quarterly basis. This will also force you to keep your books more current and less work is involved for you and your bookkeeper in the long run.
Other types of expenses where this could work would be subscriptions for things like software, or for insurance.
A few things to keep in mind when it comes to more frequent payment plans:
- Sometimes there is a small charge for not paying everything at once, but if it isn’t too large, and you know that the regular payments would make budgeting easier, then it may still be the better option.
- Alternatively, if you are still required to pay in an annual one-time payment, you may want to set up a separate bank account that is set up to make automatic transfers from your operating account, into a savings account that can be used to build up the funds required for your annual payments. You just need to be disciplined enough to avoid dipping into this account for regular expenses.
Tip #2 – Review Your Expenses Carefully for Duplicate Costs & To See Where You Can Cut Back on Previous Spending
As you’re reviewing your current expenses, I recommend looking out for any duplicate costs. Ask yourself if there’s a way to combine or bundle certain services. More often than not, the answer is yes.
Here are a few examples I’ve found based on my experience with my clients:
- Would you receive a more preferable rate for combining your mobile phone service/land lane/security/internet with one company vs spreading it out over more than one company?
- Are your colleagues/competitors using different suppliers? Could one of them provide you with the same service at a better rate?
- Do you need to attend a conference in person? Or is a virtual attendance option available?
- By attending virtually, you would be able to save on travel costs.
Tip #3 – Don’t Forget Your Debt Servicing Costs
If you’re a business with debts in various places, then it’s important to know whether your debts being held by a different number of creditors are serving your business or hurting it. If they are, I highly recommend negotiating interest rates or looking into combining loan amounts that would provide you with more favourable repayment terms.
Tip #4 – Take Advantage of Grants
One of the most overlooked money-saving tips for businesses during this time is grants. The Federal and Provincial governments have many grants available for businesses to help them cover the costs of recovering from the pandemic. They also have some ongoing programs too. These grants can be for infrastructure, or operational costs (like covering the wages or educational costs for your employees). I recommend having a look at the various government sites or considering hiring a company like Granted or Pocketed to help you apply for the grants that you qualify for.
Tip #5 – Seek Out Other Businesses That May Be Interested in Bulk Purchasing
This may be an option for some people. Some retailers are finding that their inventory levels are high right now, in order to manage their shipping costs as well as ensure that they have products available to sell. In this case, the possibility of sharing warehouse space with another business could cut down your monthly storage costs. And this is something that you may be able to do for some of your personal spendings. Can you share in the purchase of some staples with a neighbour or a group of friends?
Dayna Holland, CPA, CA (she/her)
CEO of Dayna Holland Ltd.
Are you a small business owner or self-employed and want to improve your bookkeeping habits so that you can get ahead in 2022? Be sure to check out this blog post for my top three recommendations based on conversations I’ve had this year with entrepreneurs.
Click here to learn more about Dayna Holland, CPA, CA.