The key to building any profitable business is increasing sales and decreasing costs. While sales are largely up to the consumer, taking advantage of money-saving techniques can help your business avoid financial pitfalls even if sales are down. Our business tax advisors have compiled a list of ways to reduce costs and grow your business savings.
1. Claim Research & Development Tax Credits
Many business owners hear “Research and Development Tax Credit” and assume it only refers to research-focused fields like biotech or engineering. In truth, any business in any industry can claim the credit if they perform qualifying research. If your company has developed new products, installed a more efficient processing system, or implemented new safety procedures, you may qualify for R&D tax credits.
Research must meet these four criteria to qualify:
- Permitted Purpose: The research must attempt to create, improve upon a product, or process. This change does not have to be new to the industry — as long as it’s new to the company, it counts.
- Technological Uncertainty: Technological uncertainty occurs when the information needed for development or improvement is not available or complete. The goal of the research must be to gain this necessary information.
- Systematic Process: The research must be conducted with a systematic approach to evaluate the effectiveness of an alternative or variable.
- Technological in Nature: The research must rely on physical sciences, biological sciences, computer sciences, or engineering.
If you think your business might qualify for the Research and Development Tax Credit, or if you think it might have qualified for projects in the past three years, get a free tax consultation with our business tax advisors. We know the application and documentation process inside and out, and we have helped businesses of all sizes and industries earn R&D tax credits for projects dating back to 2018.
2. Go Digital
Switching to digital technology increases efficiency and cuts business costs. An easy way to begin is to go paperless — trade printed documents for digital, especially for internal use. From branded stationery to file storage space to employee time, paper expenses add up. Digital files cut down on purchase price and storage costs, and they’re more secure (no need to fear spilled coffee or strong winds). As an added bonus, they’re far more convenient to organize; it’s easier to find a lost file by typing in a search than it is to comb through every sheet in the filing cabinet.
To streamline your business processes and free up employee time for more important work, consider automating recurring and time-consuming manual tasks. Program a pre-written reply to email requests to make sure no leads slip through the cracks, schedule social media content in advance so that you don’t have to pause in your day to post, and schedule automatic data backups to effortlessly keep your files secure. With smaller tasks handed off to the computers, your employees’ paychecks buy less busy work and more critical performance.
3. Perform a Cost Segregation Study
If you’ve recently constructed, remodeled, or purchased real estate, a cost segregation study can help you maximize federal income tax depreciation deductions. While normally buildings depreciate over either 27.5 or 39 years, cost segregation studies identify elements that depreciate faster. This increases your federal income tax credits and results in improved cash flow.
Cost segregation studies are not limited to any industry — if your business owns property, you can benefit. The best time to perform the study is within the first year a building is constructed, purchased, or remodeled, but it can be performed at any time. Our team of engineers, construction specialists, and accounting professionals have saved our clients millions of dollars in tax incentives with cost segregation studies over the last 20 years. Contact our business tax advisors to see if you’re a good fit and start saving more today.
4. Look Beyond the Brand Names
There’s no question that name-brand products tend to cost more than generic ones, and switching to off-brand products is a well-known method of saving money at home. But have you tried implementing this technique at work, too?
Take a look at the software your company uses and consider switching to other sources. Adobe may be the biggest name in the design industry, but many designers have successfully switched to Procreate instead of Adobe Illustrator or Affinity Designer instead of Adobe InDesign.
Another option is to utilize open-source software. Open-source software is generally free to download and run, and if you have an IT team, its coding is customizable as well. You can find Microsoft alternatives, client management software, eCommerce solutions, cyber security services, and more.
Consult with your team to see how a switch could impact productivity, but if there are no high barriers, new software could make a major impact on your budget.
5. Expand Remote Work
Telecommuting became a widely-embraced norm during the COVID-19 pandemic, and many companies noticed the increased savings this arrangement provided. With fewer employees in the building, overhead costs like office supplies, cleaning services, furniture, and even coffee for the breakroom drop significantly. You should see a decrease in utilities as well — computers and warm bodies drive the air conditioning bills up, along with the energy costs of laptop charging and additional lights.
You may find that you can even downsize your office space. Whether you move to a smaller building or choose to share a coworking space, you’ll save on utility bills, rent, and furniture. You could also sublease out your extra space to offset your rental price.
6. Re-Evaluate Expenses
With other money-saving changes in place, it’s time to re-evaluate the expenses you no longer need. For example, if you’ve adopted a digital filing system and minimized your paper usage, cut down on paper and ink purchases — if possible, you could even do away with a printer entirely, which will also reduce maintenance and energy costs.
Analyze your subscription services and unsubscribe from anything you no longer need. For the ones that remain, see if any of them have overlapping benefits; if one subscription only offers document creation and another offers document and graphic services, consider limiting your company to the more comprehensive provider.
7. Hire a Business Tax Advisor
Some of the most commonly overlooked business tax deductions could save your business thousands of dollars every year. Specialized business tax advisors are trained in the ins and outs of tax law, and they can recognize deductions and savings opportunities you may not pinpoint on your own. The National Tax Group has saved our clients millions of dollars over the last 20 years. Reach out to us today to learn if you qualify for lucrative tax deductions.