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How to Reduce Small Business Expenses

You likely have business expenses if you are a freelancer or a self-employed worker. These expenses are often necessary to complete your projects, whether electricity, transportation costs, specialized software, or office supplies. Do you have the impression that you are paying too much? Here are a few tips to help you reduce small business expenses. Before we start, we know that some people will say that it is not that bad to have a lot of business expenses since most of them are tax-deductible. It is true indeed; however, as Véronique from Gère ton Bacon explained in her article <a href="https://www.momenteo.com/blog/5-mistakes-to-avoid-when-you-manage-your-finances">5 Mistakes to Avoid When You Manage Your Finances</a>, the more you use tax deductions, the more your revenues decrease. It can be problematic if you want to purchase a new car or a house. The first step will be to ask yourself if these business expenses are necessary. <h3>First step: Analyze your expenses</h3> To reduce your small business expenses, you must know them. Whether you are the type of person to note down everything or not, take a piece of paper and make a list of all your business expenses during a month. The list can quickly become long. <a href="https://www.rcgt.com/en/tax-planning-guide/sections/section-6-businesses/general-business-expenses/" target="_blank">General Business Expenses</a> can include meals and entertainment expenses, conferences, cultural events, professional dues, legal and accounting fees, etc.  If you do not know where to start, why not add all your expenses to Momenteo? It is simple; you only need to click on a date and add the business expense. You can also link it to a specific category if required. This way, you will have a clear overview of your usual business expenses after a few weeks. <h3>Second step: Analyze your needs</h3> Similarly to the first step, it would be relevant to know your needs regarding your business. What do you need to meet your clients' requests? For example, an interior designer that must travel a lot to meet customers and supervise worksites might not have the same needs as a translator who works from <a href="https://www.momenteo.com/blog/9-benefits-of-working-from-a-coworking-space" target="_blank">a coworking space</a>. Make a list of everything you need to run your business, whether it is regarding the room, electricity, internet, furniture, etc. It will help you define what is necessary. <h3>A few ideas to help you save money</h3> Here are some ideas to help you reduce your small business expenses. You can also discuss with your accountant to see what could be improved. <ul> <li> Do you need a car? We all know that owning a car can quickly become expensive as gas prices are still increasing. Consequently, do you need an automobile? Do you need to meet clients or leave the house often? Would it be possible to use public transport or use car-sharing services? Transportation costs are often a significant small business expense. </li> <li> Do you need new office equipment? It can be appealing to purchase new office equipment, whether furniture or electronic devices; however, did you consider looking for used equipment? Indeed, you can save money by choosing used options. You only need to look at sites like Kijiji or Marketplace to see that there are many options for every budget. </li> <li> Do you need to meet clients at restaurants? It can be expensive to go to restaurants, even if it is for your business. You might answer that it does not matter since it is tax-deductible. It is once again true, but there are rules to follow. For example, only 1,25 to 2% of your business revenues can be deducted for meals and entertainment expenses in Quebec. Therefore, if your business revenue is $50 000 per year, the maximal deductible amount would be $650. Also, do not forget to keep all your restaurant bills. </li> <li> Do you need coffee every morning? In the same vein, do you need to start your workday by drinking a warm coffee? Do you visit your local coffee shop to get a coffee most mornings? What can seem to be a harmless $2 per day can quickly become a more significant business expense. Let’s say that you take four coffees per week and you work 50 weeks per year. At the end of the year, it will cost you $400. At this price, you could probably buy a small expresso machine to make your coffee at home. </li> <li> Do you need to rent an office? You likely need to meet clients in person if you are a consultant. You might already rent a private office. These office costs can quickly become important business expenses, especially if you only use them a few hours per week. Did you ever think of renting a shared office in a coworking space? Indeed, these places often have more flexibility and better rates to meet your needs. </li> <li> Do you need the biggest internet or phone plan? Unlimited internet or 10 Go of data? It is known that Canada is one of the countries where telecommunications costs are among the most expensive globally. After all, most freelancers and self-employed workers need a smartphone and high-speed internet access. Did you take the time to analyze all the offers and plans? New players in the market often offer competitive prices to stand out from the competition. As mentioned above, start by noting your needs and see if your current packages meet them. </li> <li> Is it possible to bill the expenses to your clients? Another way to reduce your small business expenses is to bill these fees to your clients. For example, if you need to purchase specific materials to complete a project or if you need to travel to meet your client, you can invoice them these fees. However, remember that these fees must have been presented first in the estimate or <a href="https://www.momenteo.com/blog/the-importance-of-having-a-good-contract-of-services" target="_blank">contract of services</a> to avoid any bad surprises or misunderstandings. </li> </ul> In conclusion, it is not too complicated to reduce your small business expenses. Start by making a list of all the fees and then analyze your needs. Then, take some actions according to your situation. If you feel that it is finally your prices that are not high enough, here are a few tips on <a href="https://www.momenteo.com/blog/how-to-inform-your-clients-of-a-rate-increase" target="_blank">how to inform your clients of a rate increase</a>. We wish you success with this!

Ariane