Reducing Accounting Costs For Small Businesses
A small business needs to keep track of expenses and money of the business. You need to know what is coming in and what is going out. This helps you understand whether you need to cut costs, improve profits, or tweak your activities to reduce certain expenses.
Below we have explained a few tips that can help you reduce accounting costs for small businesses.
1. Used Gear
While opening a business, we have a perfect idea in mind. This idea also includes brand new gears, for instance, new systems, real-estate essentials, printer, etc.
However, did you know that you can save a lot on these gears?
If you opt for used gear, you can save a huge amount of money initially. Later, when you have enough funds, you can replace this gear with brand new gear.
Another related trick that most businesses use here to ask their employees to bring their own laptop. This helps in reducing the costs of office gear, but it also increases the security concerns.
Hence, depending upon your situation, you can either purchase used gear or ask your employees to bring their laptops to reduce costs.
Undoubtedly, this is one of the best methods to reduce accounting costs for small businesses. How? Let’s find out.
When you execute every accounting task in-house, you have to hire people to handle accounts at some point. At the least, you need two people, one accountant, and one bookkeeper, to take care of your accounts.
Now, both of these employees should have enough knowledge to reduce accounting errors and eliminate compliance risks. For that, you need to offer them more salary to acquire better services.
This salary will be accompanied with other deductions, TDS, benefits, insurance, rewards, incentives, etc. You have to practically manage two additional employees, which also means offering them training and development opportunities from time to time.
Think of all the costs you may have to incur with in-house accounting.
When you use accounting outsourcing firms, it is easier to reduce these expenses and pay only for the services you receive. You get access to expert professionals and efficient technology. All you have to do is deliver your requirements to the accounts payable outsourcing firm.
You can outsource accounting, bookkeeping, payroll, and other such activities for hassle-free and cost-effective execution.
3. Go Paperless
Many businesses don’t even consider the cost of stationery as an element that can increase or decrease the overall budget. But, in reality, paper incurs a huge cost. You have to spend so much on paper if most of your business plans are executed on paper. This is accompanied by the additional cost of ink, printer maintenance, etc.
Further, managing all these documents and paperwork is simply not feasible. You may have to eventually hire more workforce to take care of these documents, which are also susceptible to theft.
So, go online and reduce your usage of paper as much as you can. It is even healthy for the environment!
4. Use Freelancers
Freelancers are often more cost-effective than a full-time employee. Hence, whenever you have a minimal or short-term requirement, find a freelancer instead of a full-time employee. You can also use freelancers for laid-back tasks such as content writers, graphic designers, etc.
Here are the reasons why freelancers are cost-effective:
You don’t have to spend even a single minute on orientation. Just send an email related to work, introduce them to the relevant manager, and start the work. In fact, a freelancer can start working almost immediately.
You don’t have to offer incentives and benefits to freelancers. You have to pay them for a fixed cost for which they have worked.
If you have fluctuating requirements, freelancing is a blessing in disguise. You don’t have to manage these employees for year-long, even when they have practically no work to do. Freelancers would charge you on a work basis, so if you don’t have any work for a month, you don’t have to pay the freelancer in that month.
5. Use Social Media
Yes, social media can reduce your business expenses. When you just start out, you may not have enough money to spend on sales and marketing activities. This is why social media is the best option because it can help you reach out to your users without spending a huge amount of money.
In fact, if you are a social media expert or you collaborate with a social media expert freelancer, you can gain a lot of leads with just organic marketing.
6. Create a Budget
Always have a budget. This is not only business advice, but this is also general advice for both personal and business expenses.
The reason we end up spending too much from the business accounts is that we don’t make a budget. Then, every time we have to purchase something, we think how much difference can it make. To be honest, a lot.
Hence, make a budget for every month and stick to it, unless you have to increase it or go overboard absolutely.
How Can Outsourcing Reduce Accounting Costs?
Although we have already discussed how accounting outsourcing firms can reduce your accounting costs for small businesses, in this section, we will talk about it in detail.
1. Save Money
To help you understand how accounting outsourcing firms can help you reduce accounting expenses, we will straight away move to the reasons:
You don’t have to pay the employee for the whole month. You can pay for the services you take.
You don’t have to train the employee and offer them growth and development opportunities.
You don’t have to spend any amount of time on the orientation of the employee.
You don’t have to spend money on the technology, hardware, and software you need for accounting.
You don’t have to pay for the consequences if anything goes wrong.
You don’t have to spend money on the architecture required to keep your accounting software safe and secure.
You can always include add-ons such as payroll outsourcing to get a good deal and further decrease costs.
When you remove all these factors from the picture, the accounting costs of a small business automatically reduce.
2. Improve Compliance
Compliance is a crucial activity for every small business because there are so many laws, regulations, and terms. These laws are also evolving with time. Keeping track of all these regulations is hard, which can lead to non-compliance. Now, this can cost a lot.
Mistakes of Accounting
Don’t start calculating your profits as soon as you close a deal. If you close a deal of INR 50,000, then all of this is not your profit. For example, if you need two months to complete this project, then including the manpower, the costing will turn out to be INR 20,000.
Your profit will be INR 30,000 if and only if you complete the project on time, and there is no other overhead. If the project takes three months, your expenses increase, and your profits reduce.
Many businesses think they can remember every transaction, which is not possible. You need to ensure effective bookkeeping, and you need to take care of every transaction. Even the smallest transaction from the company account should be recorded.
When you have a small business, doing accounting in-house is not the right approach. We have explained enough reasons above that suggest that accounting outsourcing firms are best in this case.
Communication and collaboration are often neglected when it is extremely important in a small business. Your bookkeeper and accountant and CXO/owner should communicate and regularly collaborate to find loopholes whenever they occur.
You absolutely need to define a budget for all your tasks. We have, of course, discussed this above, but that was only for the whole business. However, you need to define a budget for every activity. For example, sit with your bookkeeper and accountant and check the estimated spent on stationery in past months. Analyze what can you remove or if you can reduce it. Then, make a budget and stick to it. Similarly, make a sub-budget for every other activity and even projects. You can’t go on without a budget.
Accounting costs for small businesses can be just too much to handle. Hence, we have explained several tips to reduce these costs by using accounting outsourcing firms. You only have to find the right outsourcing provider, customize your package, and handover your accounting responsibility.
Paysquare is an accounting outsourcing firm that can help you manage your accounts. With skilled professionals and industry experience, we help several clients reduce the burden of accounting and bookkeeping. Check our website for more details.