Start With Budgeting Expenses
Take a long hard look at what your current expenses are. Can you identify areas that are excessive or non-essential? Start with your Income Statement where you can quickly identify sales, cost of sales, and net profits.
What expenses seem high to you and what areas can you afford to cut? If you spent a lot on business travel expenses, did you receive a return on investment for those expenses? For example, if you attended a trade show, did you connect with new vendors and find ways to get wholesale discounts? If you did, then you did well in that area.
Analyze every expense including payroll. Remember that payroll includes wages, federal, state, and local taxes as well as worker’s compensation taxes, and department of labor taxes. Did your payroll expenses rise from the prior year? Normally they do because of wage increases or bonuses; however, did your sales volume warrant the increase? If sales volumes were down, set a goal for sales employees to reach to achieve bonuses or wage increases.
Telephone and utilities are often big expenses for businesses. Do you just settle for what the utility companies offer or have you visited your local utility companies and asked about discounts or programs to help you save money? If not, this is the time to do it.
Advertising is another expense to analyze. How well did your advertising campaign do throughout the year? While advertising is important, do your sales revenues reflect what you paid to advertise your product or service?
Take a long look at all of your expenses and see which ones should be decreased, stay the same, or changed.