In a quest to cut costs, many businesses inadvertently leave money on the table by overlooking legitimate savings or chasing false economies.
From paying more than necessary to cutting budgets on activities that bring home the bacon, here are some of the most commonly overlooked savings in business to look out for in 2021.
Advisors warn against cutting marketing budgets at the risk of plunging into obscurity. However, that spend should deliver a decent return on investment (ROI).
Giving into Facebook’s prompts to boost a post might seem harmless, but it’s an easy way to burn through cash.
Not targeting ads effectively is akin to pouring good money down the drain. Determine who your ideal customer is, which media they consume and when they’re most likely to buy. Then tailor your ads accordingly.
Have a plan and a budget and stick to them.
2.In-house efficiencies
Efficiencies are the holy grail in business – doing the same thing (or better) for less money. Yet, some are less obvious than others.
Improving employee welfare and workplace culture can reduce staff turnover – saving on recruitment, training and exit payouts while stemming the loss of skills, experience and intellectual property.
Don’t confuse busyness with productivity: teams should work on revenue-driving activities, not administration. Look for ways to simplify operations, freeing staff to work on core tasks.
Avoid sacrificing existing clients for new ones. It’s more expensive to attract new customers than to give existing ones more attention and value.
Automate inventory control and staff rosters to reduce errors. Running out of stock or being short-staffed ultimately means lost sales.
Streamline business finances and develop strong financial foundations. Invoicing promptly means money coming in sooner, while paying bills and taxes on-time eliminates interest and penalties.
3.Risk mitigation
“Prevention is better than cure” typically applies to health, but the same goes in business.
Review your risk mitigation strategies and stress test them for weaknesses. Risk mitigation includes:
insurance against business interruption and loss/damage/theft
contingency plans for key staff absences
automatic back-ups of essential software and data
security protocols, password management and staff cyber training to avoid fraud and hacks
work-from-home capabilities should staff be unable to attend the business premises (as COVID-19 has demonstrated)
Insurances and staff hours spent on these are up-front costs, but they’ll save big bucks should disaster strike.
4. Misplaced cost-cutting
Why slash the stationery budget only to blow those savings elsewhere? It sounds silly, yet many businesses fall into this trap. It’s important to deliver real savings.
For instance, stop paying rent on unused space – downsize to smaller premises or sub-let surplus space to subsidise the cost.
Upskill employees in revenue-generating activities to boost income, rather than fire them and face hefty exit payouts.
Don’t overlook taxes when looking for cost savings. Claim legitimate depreciation of business fit-outs, office furniture, vehicles and equipment. Update vehicle logbooks to claim eligible mileage allowances. Apply for relevant tax concessions and COVID stimulus.
5. DIY
“It’s cheaper to do it myself”, many business leaders claim. But are you sacrificing your ability to earn more in the process?
Weigh up the cost of outsourcing against the additional revenues and cost-savings you could generate by spending your time elsewhere.
Outsourcing could involve delegating tasks to new or existing employees, hiring contractors or implementing new technologies.
6. Buying power
Consider how to get the best value for your money.
Interest rates are at record lows, making money cheaper to borrow to upgrade equipment or expand. Refinancing debts could also slash repayments. However, plan your finance needs ahead of time – cash flow quick-fixes like short-term loans typically cost more.
Could you buy the business premises in a self-managed super fund (SMSF)? That way, your retirement fund receives the rent rather than a third-party.
And avoid the “lazy tax”: annually reviewing subscriptions, utilities, loans and insurances can net substantial savings. Often, you don’t even need to change providers – just ask for a better rate or get them to price-match a competitor!
Helen Baker is a licensed Australian financial adviser and author of – On Your Own Two Feet Steady Steps to Women’s Financial Independence. Helen is among the 1% of financial planners who hold a master’s degree in the field.
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Welcome to the Smarter Living newsletter! Every Monday, S.L. editor Tim Herrera emails readers with tips and advice for living a better, more fulfilling life. Sign up here to get it in your inbox.
No, I’m not going to tell you to skip tomorrow’s latte (or whatever minuscule semiregular purchase you make). Sure, you’re welcome to skip it, and if lattes make up a truly consequential portion of your budget, then cutting back would probably help. But for most of us, it’s simply unhelpful advice.
Then what does matter when it comes to personal finance? Well, more than skipping the occasional latte, getting a grip on your finances is about knowing where you want to go in the big picture, and knowing what steps will get you there.
Let me back my way into a personal example to show what I mean. My goal for this year is to save 60 percent of my income. It’s a stretch goal for sure — last year I saved around 35 percent — but it’s probably achievable. (And even if I fail, I’ll still likely end up saving more than I did last year, which is a win.)
But why is this my goal? And how will I actually get there?
Those are the two questions to ask yourself when you’re thinking about your money. In the big picture, I am saving for a down payment on a home — this is my why. But more important is my how: For me, that how is a combination of increasing my mindless saving (more on that below); decreasing my mindless spending (also more on that below); and eating out less, because that is by far the most consequential portion of my budget that I can directly control.
Your whys and hows will, of course, be different from mine, but knowing what they are is the only way you’ll get your financial house in order. Having goals is great, but better is truly knowing why those are your goals and how you’re going to get there.
Welcome to Personal Finance Week in Smarter Living. Each day we’ll publish a fresh story on money that will help you in your financial life. Whether you’re struggling with credit card debt, have no idea how to invest, never learned how to balance spending methods or need to have that dreaded “My parents are retiring and I don’t know what to do” conversation, we’ve got you covered. Check nytimes.com/smarterliving each day this week to keep up.
To kick things off, here are three things you can do today, right after reading this, that can help you reach your goals.
Stop saving your money
O.K., to be a little clearer: Stop actively saving your money. Automate it so you just don’t have to think about it. This is what I mean by mindless saving.
Your paycheck should be making pit stops before it hits your account, getting a little smaller with each stop. The priority of these stops, and the amounts saved, will vary based on your current financial life, but the general idea is the same: Automate your savings so you never even have to think about saving anything. Take yourself completely out of the equation — you can’t miss (or spend) what was never there. Self-control is a myth anyway, so just don’t bother with it.
There are many ways to do this, all of which you can do right after reading this: increase your 401(k) contributions by a percentage point today; have your workplace split your paycheck among separate savings accounts; have your investment accounts make automatic withdrawals the day your paycheck hits your account; increase your automatic contribution to your Health Savings Account; or set up or increase recurring transfers from your checking account to your savings account.
Whatever your savings needs are, the point is to make them automatic. Again, you can’t miss (or spend) what was never there. Stop budgeting to save X amount each month, and just have that amount removed from the equation.
If you’re just starting out, balance paying down high-interest debt (generally anything with an interest rate above 5 or 6 percent) with saving for your emergency fund (if you haven’t established this yet, aim to build your savings to $1,000 or the equivalent of one month’s expenses, whichever is more). Paying off high-interest debt offers a bigger return on your money than almost anything else you can do, and having a cushion of savings is crucial for all of the events you can’t predict.
[Like what you’re reading? Sign up here for the Smarter Living newsletter to get stories like this (and much more!) delivered straight to your inbox every Monday morning.]
If you’re a little further along, you have lots of options. As an example, here are the five stops my money automatically makes: 401(k); then H.S.A.; then emergency/medium-term savings; then my investment account; and, finally, short-term savings/spending (think monthly expenses). Whatever’s left is what I get to spend. I hit 100 percent of my savings goals, and I don’t have to think about it once.
Decrease your mindless spending
Just like cutting back on lattes, this a regular piece of advice we hear about all the time — but this one is a little more grounded in reality.
You’re probably not going to cut all of them, but it’s very likely there are a few subscriptions you completely forgot about (I did this last month and discovered I had two subscriptions I didn’t know I had).
Instructions to find and cut your subscriptions on many devices and services can be found here, but also go through your bank account and look for recurring expenses. You might find something you didn’t even know to look for.
Personal Finance Week
Welcome to Personal Finance Week at Smarter Living! Catch up on our previous stories in this series
The Young Person’s Guide to Investing
The Best Way to Use a Credit Card? Treat It Like Cash.
3 Ways to Retrain Your Mind to Get Out of Credit Card Debt
Dear Mom and Dad: Are Your Finances Ready for Retirement?
Switch to a high-yield savings account
This one is very simple, and it’ll take you all of 15 minutes.
First, open a savings account at a bank that offers an annual percentage yield of at least 1.6 percent or higher — this is the amount of interest the bank will pay you just for keeping your money with them. I’d recommend the online banks Ally or Marcus, both of which I use.
Next, transfer your current savings account to it. This is your new savings account.
That’s it! You’re done!
We did this because regular savings accounts offer a small fraction of the A.P.Y. you get from a high-yield account. For example: A Chase savings account today offers 0.01 percent, while a Marcus account offers 1.7 percent. At those rates, if you had $500 in savings in each account and didn’t contribute any more, at the end of five years you’d have $500.25 in your Chase account and $544.36 in your Marcus account. It’s not a fortune, but it’s worth 15 minutes of your time today. (That’s the magic of compound interest.)
What are your finance goals for 2020? Tell me on Twiter @timherrera.
A new report from the World Economic Forum’s Global Future Council on Energy seeks to assess the signs of whether there will be a gradual or a rapid “energy transition.” In other words, will global economies switch from fossil fuels to renewable energies slowly or all at once?
The report takes for granted that the world will transition to using renewable energies—mainly solar and wind—by the middle of this century. However, the report omits a crucial piece of technological development from its forecast: batteries.
The few times batteries are mentioned, they are generally referred to as “storage,” because batteries are essentially just storage containers for electricity or power. The report draws conclusion like, “Even as penetration [of renewable power] rises, technologies such as storage and demand response are likely to make higher levels of penetration cheaper.”
This is serious flaw with the conclusions and forecasts because we do not yet have that technology to make better and cheaper batteries, and we don’t know when or if we will.
Solar and wind offer the promise of a plentiful, clean power. Yet, we still need to improve the efficiency of their power production, and we need to find a way to effectively store the power they produce. The wind does not always blow, and the sun does not always shine.
If and when we find the ability to store the excess power created by wind and solar (and hydro and nuclear and anything else), we will be well on our way to much cleaner energy production. Right now our batteries cannot store that kind of power over the long term, regularly recharge, and last for years.
Someday, someone will invent the new generation of batteries that will revolutionize energy use. When they do, the transition to renewable energy will surely be rapid. This breakthrough could be as close as a few years away. Or perhaps it won’t come for decades.
However, making assumptions about the speed at which global economies can transition away from fossil fuels without a revolution in battery technology is just wishful thinking. Investment and innovation in battery and energy storage technology is still needed before we can transition away from fossil fuels.
I’m an energy historian writing about how governments and energy businesses interact globally. My work looks at how policy, wars, diplomacy, the stock market, oil pricing, and innovation impact the future of energy. I am the president of Transversal Consulting, a firm that provides consulting on energy and geopolitics to a range of industries. I am also a Senior Fellow at the Atlantic Council. My book, Saudi, Inc., (Pegasus Books, 2018) covers the history and policy of Aramco and Saudi Arabia.
A few weeks before the general elections, the Spanish Government approved on Friday 5 a Royal Decree that regulates the new conditions for self-consumption of electricity, which encourage collective self-consumption and establishes a simplified mechanism for compensation of self-produced and unconsumed energy. The new energy regulation has put an end to the so-called ‘sun tax’ introduced by the conservative Popular Party in 2015 to tax the development of photovoltaic solar energy and self-consumption in Spain. From now on, Spain will be in line with its European neighbors and closer to achieving the EU’s energy targets for 2030.
Lower prices and new actors into the electrical system
Among the measures introduced by the Royal Decree, it stands out the authorization of the collective self-consumption which aims to benefit both households and small businesses. From now on, several consumers can be associated to the same installation of solar panels and it will be allowed to install photovoltaic panels in adjacent buildings that have better orientation, as long as there is an agreement between the members of both buildings. Also, the new regulation simplifies administrative procedures, and, in addition, it establishes a simplified mechanism for compensation of self-produced and unconsumed energy.
The Minister for the Ecological Transition, Teresa Ribera, foresees that the boost of self-consumption will have a “positive effect on the economic activity, on the electrical and energy system, and on consumers”, such as the reduction of the price of the electricity bill. According to the Government, the measures adopted will permit society to take advantage of the potential that solar energy can offer as it will provide an alternative to citizens and it will allow the entrance of new actors into the electrical system.
The EU put an end of the ‘sun tax’
With the new regulation, Spain leaves behind the era of punishment for energetic self-consumption. In November 2018 the Government of Pedro Sánchez took the first step repealing the so-called ‘sun tax’, approved by the previous Government of Mariano Rajoy in 2015. The controversial law that taxed self-consumption was not very well welcomed by the EU, where the fight against climate change has been at the center of the political agenda for years.
One of the declared priorities of the Commission of Energy and Climate Change, led by the Spanish commissioner Miguel Arias Cañete, was to promote the use of renewable energies and energy saving. However, for years the Government of the Popular Party (to which Cañete belongs) blocked the attempts to advance in the matter of renewable energy.
The turning point came with the motion of censure that removed Rajoy from power last summer. A few weeks later, the European Parliament and national governments agreed to increase from 27% to 32% the mandatory quota of energy from renewable sources by 2030 and prohibit Member States from imposing taxes on the self-consumed energy, as the Spanish ‘sun tax’, in order to comply with its obligations in the fight against climate change.
Climate change, a matter of political will
“Ambition in the fight against climate change is a political decision and the last-minute turn in the position of the Governments of Spain and Italy has shown it by making possible something that seemed impossible”, stated Greenpeace in a press release after the EU agreement in June 2018. Although Greenpeace considered that the renewable targets set for 2030 are still insufficient, the organization celebrated that for the first time the right of citizens to actively participate in the energy sector was recognized and, therefore, Spain was forced to derogate the ‘sun tax’.
For Green Peace, the agreement marks a before and after regarding the right of citizens, local authorities, small and medium enterprises and cooperatives to produce, consume, store and sell their own renewable energy, without being subject to punitive rates or excessive limitations. No matter the result of the general elections next April 28, Spain must now join the EU efforts to achieve a sustainable consume energy and from now on, Spaniards may have an important role to play not only as consumers but as responsible producers as well.
thefamilymoneymentor.com – February 20
info.conductiv.com – February 19
globalfintechseries.com – February 17
searchcio.techtarget.com – February 16
thinkfinance.io – February 16
event.webinarjam.com – February 12
wattsadvisor.com – February 6
time.com – February 6
wealthcareadvisorsllc.com – February 5
