7 Things Small Businesses Can Do To Cut Costs Now

Eighty percent of small businesses are feeling the effects of the COVID-19, and 37 percent have less than a month before they’re out of money. In other words, small businesses need to manage their existing resources as efficiently as possible until more help arrives (and it is coming!). 

But as a small business owner, you already knew that which leads us to the bigger issue: How do you hang onto the cash you have right now?

How to Cut Costs Fast, According to Financial Experts

Some of the best financial experts, accountants, and advisors to help us answer that question. We connected with over 80 of those experts to find out how small businesses can cut expenses and keep their doors open. 

Here’s their best advice on what to try today.

Review your finances in detail ASAP

Before you can cut costs, you need to know what those costs are in the first place. And that starts with an in-depth dive into your monthly expenses. “Now is the time to do a very serious financial checkup,” says Sheraline Thomas from Calculated Books, LLC.

Sit down and run through every single line item, so you can “plug the leaks in your business right now,” says Teresa Oliver of Millenial Bookkeeping & Advisory Services. 

“You need to burn the midnight oil for a few nights, comb through every single expense line, and dig into the details. Knowing your break-even will give you insight on how much you can afford to lose before the dam starts to give way,” she says.

After you do so, project your revenue and expenses for the coming months to get an accurate picture of where to cut costs. Your bookkeeper or accountant can help with this.

Reach out to your vendors and discontinue autopay

Take a hard look at the services you pay for regularly and consider whether they are critical or not. If they are, reach out to those vendors to ask about options for reducing costs, delaying payments, or requesting forbearance. 

“First things first, identify your liabilities,” says Steven Edisis from Dynamic Capital. “Call anyone that you pay on a monthly, weekly, and daily basis and request a forbearance. If they cooperate, great, if not, stop the autopay immediately.”

At the very least, consider switching from an autopay subscription to a month-by-month option, which can reduce your short-term cost and commitment.

Talk to your landlords or mortgage providers

Aside from reaching out to your vendors, think about the bigger expenses too, like your rent or mortgage. Many companies are willing to work with small businesses because they know this is a trying time. The caveat? They don’t know you’re struggling if you don’t communicate.

If you’ve had to close down your business during the outbreak, this communication is especially critical. To start the conversation, try this simple template from accountant Lis Lee from Lis Lee Accounting:

Hello [vendor name],

We are writing to all [your company name] [vendors, lenders, property managers, etc] to let them know that we were forced to temporarily close our doors earlier this week due to the COVID-19 pandemic.  As you are aware, this situation is definitely placing a strain on many small businesses, including [your company name].

We are so appreciative of the partnership with [vendor name] and are reaching out to inquire as to what your company is doing at this time to work with your tenants? Are there any options to pause payments without penalty or any other ways you are working with [customers, tenants, borrowers] to help during these uncertain times?  

Thank you and best regards,

[Your company name]

Consider switching service providers 

Another way to cut costs is to switch service providers completely, as companies are reducing their rates to support small businesses during the outbreak.

Think about all aspects of your business when you consider making a switch, from debt to processing fees, suggests Nia Jackson-McClure from Transcend Commercial Capital. 

“With rate reductions, this is a great time to reevaluate not only your current business debt but also your payment processing fees. Can you reduce those costs 10-40 percent by switching? Now is an excellent time to check,” she says.

Look at your product offering

If you’re offering more than one product or service, it’s time to evaluate them. Are they all making money? Are there costs associated with storing them? With shipping them?

Once you determine what offerings are making money and what ones aren’t, cut your losses. To reduce inventory, bundle it with other products or offer buy-one-get-one-free sales to eliminate any storage costs fast. 

“For costs, it’s important to review how your business operates and to see if you can find any efficiencies to reduce your expenses. For example, end a product line because the margins are too low,” says David Wilhelm from Ledger Pros.

Try cost-cutting measures that save employees 

Unfortunately, many small businesses that have employees are forced to let them go—nearly a third of 12,000 small businesses surveyed in our Weekly Pulse Poll reported eliminating positions as a cost-cutting measure. But this should be a last resort, especially with the launch of the stimulus package.

Instead, consider ways to cut employee costs without cutting the employees themselves. Some companies have taken pay cuts across the board to save jobs. “I'd first see if there is room for the owners to cut back on their salaries and try to keep their best employees,” says Cassandra Bartunek from Urban Ledger, Inc.

Another idea from expert Jorge Mora from KTimeHR—temporarily reduce benefits if you offer them. 

“If you are currently offering a 401(k) company match, you might want to consider suspending the match. That should provide some relief. Plus, it's better than having to cut your workforce,” he says.

And get creative in how you save employees while reducing costs, suggests Harvard Business Review. Check with your full-time employees to see if they’re open to working part-time for now or reduce your workweek from five to four days.

Take advantage of tax delays if you know you’ll owe in

One way to reduce your costs is to delay filing and hence paying your taxes. The federal government in the US is delaying the filing date until July 15, 2020, and some states are following suit.

Check with your state to see if this is an option for you. It might help you keep more cash on hand in the short-term. 

Take advantage of tax delays if you know you’ll owe in

Ultimately, most of us will need to look to alternate funding sources as the crisis drags on, and hey, that’s okay. Just know that relief is on the horizon.

In the meantime, try to keep as close of an eye on your expenses as possible, cut costs where you can, and stay hopeful that the small business community can recover and be stronger than ever. We’re with you every step of the way.