I’m on a mission to cut expenses this year. Truth be told, I’ve been sloppy and have not paid attention to fees and charges in 2014 as I should have.
I was racing around the country promoting Accounting for the Numberphobic; A Survival Guide for Small Business Owners. Now it’s time to save money.
One of my New Year’s Resolutions is scrutinizing where every dollar goes and determining if I’m getting a return on investment for that money in 2015.
Here are three ideas to cut expenses and to maximize returns.
Reduce Bank Fees and Charges
Today I visited my bank and cut $107.88 from my business banking expenses for next year by cancelling the overdraft protection account.
The bank was charging me $8.99 per month. It doesn’t sound like a lot on a monthly basis, but on an annual basis, it became meaningful.
Close all accounts that aren’t working hard enough for your business. Consolidate and simplify your life.
Avoid Opening Any Bank or Credit Card Account the Doesn’t Pay an Adequate Return
The bank representative tried to sell me on a savings account for both my personal and the business account. The interest paid is .05%.
On a balance of 2,000, the interest earned on the account would be, are you ready for this? ONE DOLLAR. That’s right.
One dollar over twelve months or less than one dime per month which is truly pathetic.
The administrative cost to reconcile the account goes like this:
Let’s say it takes my bookkeeper 5 minutes each month to reconcile an additional account. At an hourly rate of $60 per hour, that’s $5 per month just to do the task or $60 per year.
Would you spend $60 to make $1? Now you get the picture.
Banks will never learn, but you should.
Cut Consultants or Subscriptions that Haven’t Delivered
Be brutal. If your business is not getting a return on investment, consider cutting that expense, that consultant, or any subscription that’s not paying the freight.
Subscriptions also includes software subscriptions or special applications on your mobile phone that ding you five or ten bucks a month. It all adds up.
A Good Return on Investment Looks Like This
For every dollar spent on the business, the business needs to get at least ten back in value in order to afford that expense.
This is the screen I’m using from now on. It’s prevented me from overspending. It has also been a coaching tool for my sub-contractors.
- Consultants or sub contractors are not getting paid to do work; they’re getting paid to deliver results.
- If I renew a contract or do not renew a contract, my consultants know why.
- Now my bank and my sub-contractors are on the same side of the P&L as I am.
If anything here needs more clarification, chapters 1-3 of Accounting for the Numberphobic; A Survival Guide for Small Business Owners will make it crystal clear.
Reading it could be a great New Year’s Resolution!
Every dollar you save in 2015 will drop right to your bottom line.