While the economic crisis continues, it's a constant challenge for small businesses just to weather the storm. Streamlining various aspects of company-wide operations is a priority that can be approached from various aspects.
Key areas that CPAs and others have identified as potentially reaping cost benefits for businesses are inventory tracking, payroll outsourcing, retirement planning, and negotiating better credit terms. In addition, seeking financial advice can aid in establishing cost-saving goals.
"Two of the biggest control costs that small businesses have are their inventory and staffing costs," said W. Neal Carris, CPA, a shareholder at Glickstein Laval Carris, in Maitland, Fla. Carris suggested that to cut down on inventory costs, businesses should schedule their services and shipments to coincide with their sales cycles to save capital.
Cash on delivery is something more businesses are demanding either in full or in part to protect themselves in the receivables department, said Theresa Ruzicka, CPA, partner-in-charge of the Small Business Group at RubinBrown in St. Louis.
In terms of staffing, businesses should plan ahead to make sure that they can cover overhead from month to month, Carris said. To reduce employment-related costs, businesses should split shifts and hire temporary workers, he added.
Outsourcing payroll can save not only with internal payroll costs but also with compliance. One particular area of the downturn's impact is the increase in unemployment insurance claims.
"First of all, it's a time-saver," explained Don McLaughlin, vice president of marketing for ADP Small Business Services. "We tell people all the time you probably didn't go into business to do payroll."
Payroll compliance is a big portion of ADP's services, as well as a key area for businesses, McLaughlin said. ADP not only calculates proper withholding rates, but also has a premium payment solution to figure out workers' compensation insurance.
ADP calculates premiums and sends them to the insurance carrier and thus helps avoid upfront estimated payments to the insurance carrier at the beginning of the year because the premiums are paid in increments over each pay period.
ADP's unemployment solution can help companies avoid having to pay out unnecessary unemployment claims. During an audit, ADP can work with the small-business owner to see if there are ineligible claims in the system and can file appeals with the state where necessary. "It's not always as clear-cut as it ought to be," McLaughlin added. "We take a look at what's actually going on."
McLaughlin noted that ADP consistently sends clients announcements on changes, including on payroll withholding rates on the latest tax tables, state by state. "We're in the compliance business," he said. "There is no forgetting deadlines."
Carris said that he cautions employers to get payroll taxes in on time. Penalties and interest on late payroll taxes can add up, he said. In addition, those company employees who are authorized signers on paychecks can be held personally responsible by the Internal Revenue Service for a company's late tax filings.
Amelia Soto, vice president at Pension Parameters Financial Services Inc., a New York-based full-service financial advisor for small businesses, said that retirement planning is an area lagging at small businesses. "There are ways to actually assist them in the downturn," said Soto.
Pension Parameters works with businesses to develop formulas on how they can maximize tax benefits. Soto said that businesses should look to work with advisors that match their needs and decide what type of financial advisory firm would be best suited. "It all depends on one's asset base," she said. "It's a niche."
Soto said that putting a retirement plan in place gives small businesses an added tax deduction benefit from retirement contributions. Businesses can either offer retirement plans directly or they can establish partnerships through which to offer these plans. "They should try to maximize opportunities on the tax side," echoed RubinBrowne_SSRqs Ruzicka.
CREDIT & DEBT
Business credit continues to be an area of attention. Lawmakers in November pressed the Obama administration to unlock more credit lines for small businesses through Troubled Asset Relief Program funds.
Banks may be wary of increasing credit, but could be more favorable to renegotiating existing arrangements. Ruzicka suggested that businesses should try to renegotiate any debt they might have with their banks to try and get more favorable terms as customers are looking for changes in payment terms.
Accounts receivable is an area to review, Carris pointed out. Businesses have to realize that if they are having trouble with their bills, they need to tighten up credit with their customers, he said. One way is to start taking credit cards for payments. Another possible way could be direct debits from checking/bank accounts, instead of using credit cards.
Businesses should try and tap into referral sources, Ruzicka said, adding that they may want to work with business advisors to review how they can maximize tax benefits and find benefits from other areas.
Good communication is important with advisors, Soto noted, adding that the business needs to work with the advisor to be clear on what its expectations are from the advisor. Soto said that she recommends that businesses do annual fiduciary reviews with their advisors and work with plan sponsors to get where a business wants to be: "It should be a dialogue."
Businesses can also try and cut expenses that may not be closely tied to daily operations, said Ruzicka. These can include marketing or office expenses.
If staff cuts are needed, Carris suggested sub-leasing any extra space that results from staff cuts. "Most people are stuck with their rent," he said. "It's all about cash flow; cash in, cash out."
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