AVM Associates, LLC

10/13/2022

Small business accounting FAQ

How do I do accounting for my small business?

You can set up basic small business accounting records in a spreadsheet, though this is more tedious, prone to manual errors, and time consuming than a comprehensive small business accounting software. At the very least, you’ll want to track expenses and income in a secure cloud-based platform.
How much should I pay an accountant for my small business?

Small business accountants range in price, depending on a number of factors. If you’re hiring in-house, the US Bureau of Labor Statistics estimates accountants make an average annual salary of $70,000. Bookkeepers come in at $17.26 per hour, according to PayScale. If you’re outsourcing to an external contractor or one of many accounting firms, costs vary from a few hundred dollars per month to thousands per month—depending on the level of services provided and complexity of your small business accounting needs, among other factors.
What does an accountant do for a small business?

A small business accountant does many things, including the following:
Form your business
Help write a business plan
Audit your cash flow
Find cost-cutting opportunities
Advise on business strategy
Manage debt
Chase down payments
Write and submit loan applications
Plan budgets
Set up your accounting software
Manage inventory
Recommend business tools
Help open new bank accounts
Oversee payroll
Year-end financial reporting
Prevent audits
Advise on personal finances
What does a bookkeeper do for a small business?

Bookkeepers handle ongoing, administrative duties for small business accounting, including:
Reconcile accounts
Record transactions
Manage accounts receivable and accounts payable
Adjust entries
Prepare financial statements
Send invoices
Set up and manage technology and tools
Stay up to date on laws and regulations
Basic payroll
Work with your accountant, tax preparer, and tax planner

09/01/2022

Top 15 Small Business and Startup Accounting Tips

Every small business needs to follow basic accounting processes to ensure strong financial management practices. These include:

Separate business and personal expenses. One of the first steps a small business should take is opening a business bank account, which it can do after obtaining its Employer Identification Number, or EIN (sole proprietors can use social security numbers). Business bank accounts offer several advantages over personal ones, including:

Making it easier to track and substantiate business expenses to take advantage of tax deductions.
Offering personal liability protection by keeping business funds separate from personal funds.
Providing the option of a line of credit that the company can use to cover cash gaps.
Businesses should open a checking account, savings account, credit card account and merchant services account, which allows the company to accept credit and debit card transactions from customers.

Get bookkeeping software (and a bookkeeper). Bookkeeping is the organized process of tracking all income and expenses. It’s a critical component of financial management that ensures business owners have the information they need to make sound business decisions. For many small business owners, accounting is not among their skill set. Hiring a person dedicated to the task or, for smaller businesses, outsourcing the function is often a wise investment.

Accounting software automates bookkeeping processes that are time-consuming and error-prone if completed manually, and makes it easier to find all of that information to complete financial statements. Small businesses are finding a lot of success with cloud-based accounting software, in particular, with more than half of U.S. respondents surveyed by Robert Half reporting their companies use either some or only cloud-based solutions for accounting and finance. Although most businesses start with basic accounting software, as they grow and become more complex, they may need to invest in an enterprise resource planning (ERP) system. Once a company has an ERP system, it can add modules for other business functions, with everything tied to a single database.

Develop a budget. One of the first steps in creating a business plan is coming up with revenue projections and a list of anticipated expenditures, and then comparing that budget to actual expenses and revenue. A study by The Federal Reserve Banks of Chicago and San Francisco reported that more than 60% of businesses with excellent financial health always built a budget and, subsequently started a separate bank account for payroll. Less than 5% of businesses with poor financial health engaged in these two financial planning and management practices.

Keep accurate business records. Recordkeeping is one of the most important responsibilities for a small business owner. Accounting software can automate much of the recordkeeping process and digitally store financial records. That makes it easy to document the amount, time, place and business purpose of a transaction when you claim expenses as tax deductions. IRS requirements mandate keeping the records, in general, for at least three years—accountants recommend keeping them for seven years. Records a business needs to maintain are listed in detail in IRS Publication 583. But a few worth calling out for small businesses and startups include:

Gross receipts are the income you receive from your business, and records include: Cash register tapes, deposit information (cash and credit sales), receipt books, invoices and Forms 1099-MISC.

Expenses are the costs you incur to operate your business, and records include: canceled checks or other documents reflecting proof of payment/electronic funds transferred, cash register tape receipts, account statements, credit card receipts and statements and invoices.

Receipt scanners make it simple to digitize receipts and invoices for easy tracking by automatically mapping the contents to defined fields in the accounting software. Accounting software may either offer its own mobile app or support a third-party app that enables an employee or business owner to scan receipts with their smartphone camera. These apps use optical character recognition (OCR) technology to translate text into machine-readable code.

Fixed assets need to be recorded to compute the annual depreciation and their gain or loss when you sell them. Asset documents include purchase and sales invoices; real estate closing statements; canceled checks or other documents that identify payee, amount and proof of payment/electronic funds transferred; credit card receipts and statements and invoices. Costs related to the purchase of limited life intangible assets are amortized. Other asset categories, such as current or indefinite-life intangible, are neither depreciated nor amortized.

Choose an accounting method. Every small business and startup must pick a set of rules for determining when to report income and expenses. This provides a consistent accounting method for tax purposes. In general, under changes put in place by the Tax Cuts and Jobs Act, small businesses with $25 million or less in annual gross receipts for the three prior tax years can choose between accrual accounting and cash basis accounting. However, because Generally Accepted Accounting Principles (GAAP) require accrual accounting, many companies prefer this method.

Cash basis accounting can be more straightforward and easier to manage for small businesses because revenue is recorded when payment is received. Similarly, expenses are deducted when the money actually comes out of the company’s account. Accrual accounting records the sales when a product ships or a service is delivered. In a retail setting, a sale is recognized at the time of purchase, and in other industries revenue may not be recorded for several weeks or even months after the sale. It requires double-entry bookkeeping. Since accrual accounting takes a long-term view of the business, it generally provides a better picture of a company’s financial health.

Keep the books up to date. Without keeping the books current, owners and employees don’t have a clear picture of the company’s financial state. Automating receipt and invoice capture is one way to ensure the books are always up to date. Another important step is to link bank accounts with your accounting software. Businesses can download credit card and bank statements and manually import them as CSV (Excel), but some accounting systems offer a plug-in that will pull information from your bank account and automatically retrieve daily bank transactions and statement files. The business can define the matching rules in their system to reconcile the statements, which makes the reconciliation process much easier. Some accounting software offers a direct integration to banks, so the business owner can manage and complete all banking tasks in the accounting system without also logging into their bank account portal.

Optimize AP terms and invoicing. To hold on to cash longer, take advantage of credit terms from key suppliers. Pay bills on a schedule that maximizes your cash flow, and when possible, pay early with vendors that offer a discount for doing so. To ensure steady cash flow, do everything possible to encourage on-time payment from customers. That could include offering discounts for early payment, running credit checks on potential customers before doing business with them and, when necessary, revoking credit terms. Accounting software that can automate invoicing processes by automatically sending out bills and follow-up reminders could also help prevent outstanding invoices from piling up.

Separate accounting functions. Public companies must follow regulations that require controls to ensure segregation of duties. Small businesses are more likely to have a single person handling many accounting functions, but this creates an environment that introduces risk of accounting fraud. However, owners can minimize this risk by putting some simple controls in place. One effective control is to ensure the same person who cuts the checks doesn’t sign the checks and reconcile the bank statements.

Keep an eye on certain high-cost expenses. Labor costs are the largest expense for most small businesses, and inventory is often another. To reduce labor expenses, many small businesses outsource work to contractors that bill at an hourly rate. This can be cheaper because the contractors may not need 40 hours/week to complete your work and they don’t require benefits. Time-tracking software can help leaders understand how much certain tasks are costing the business, enabling the business to better budget and find ways to control these expenses. Companies can lower inventory costs by tracking inventory carrying costs, inventory turnover ratio, amount lost to obsolete inventory and other key metrics.

Plan for major investments. By consistently tracking expenses and revenue, the business can identify the best time for large investments and establish the credit it may need to cover the cost. Business credit cards can help an organization establish a credit history so it has a better chance at qualifying for financing (and optimal financing terms), including lines of credit and loans, when it needs more capital. Securing these funding sources are important to a company’s overall financial health—45% of businesses with excellent financial health received loans or credit cards from a bank, compared to just 3% of companies with poor or below-average financial health, per the Federal Reserve study. Additionally, credit cards offer perks for the business such as business rewards or travel rewards.

Carefully monitor tax preparation. The IRS generally requires that sole proprietors, partners and S corporation shareholders make estimated tax payments if they expect to owe taxes of $1,000 or more when their return is filed. There are specific employment tax records you must keep (detailed in IRS resources on Recordkeeping for Employers and Employer’s Tax Guide). The IRS provides worksheets in Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations that help calculate estimated tax. Businesses should also check the IRS tax calendar. The tax calendar includes due dates and actions for every month. A business can sign up for email reminders, or even import reminders into Outlook.

Seek professional tax preparation guidance. The NSBA says that one in three small businesses report spending more than 40 hours each year on federal taxes. It’s not surprising then that roughly two-thirds of small businesses pay an external tax professional/accountant to handle their taxes. There are even more benefits here for a sole proprietor, as the cost of hiring someone to prepare your business’s tax return is deductible.

Ensure inventory data is accurate. To prepare financial statements, the business needs accurate inventory data. It must calculate the cost of goods sold (COGS) for the income statement, and the value of inventory on hand for the balance sheet. Physical inventory is tracked either by manually counting items on a regular basis or pairing counts with an inventory management system that can automatically adjust the numbers as sales happen if it’s integrated with the point-of-sale system and accounting software. Inventory management software not only makes it much easier to track inventory, but the information will be more accurate.

Use financial statements to evaluate business performance. Logging expenses and income are the basis for generating these three key financial statements. Income statements help the business determine its profit (or lack thereof), a balance sheet shows assets, liabilities and shareholders’ equities for a snapshot of its financial position at a certain point in time, and the cash flow statement shows whether the company has enough money flowed into and out of a business in a given period and how much cash remains. When combined with the balance sheet, however, the cash flow statement can show whether a company has sufficient cash to meet its current obligations. All three statements are required by banks and investors to secure financing or funding.

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Generate financial projections. Financial projections help businesses estimate future income and expenses to anticipate if they need financing or should make capital expenditures. Financial forecasts help business leaders estimate cash flow and determine when to change pricing or production plans.

Forecasts provide important financial information to external stakeholders when the business seeks a loan or funding, or if the business is the target of an acquisition. A company can also use these forecasts to create pro-forma financial statements, which are projected income statements, balance sheets and cash flow statements. Projections are based on financial modeling techniques and provide the answers to questions that may come from lenders, investors or other business stakeholders. At their basic level, they provide the answer to a question like: if we lend you this money, what will you do with it and how will you pay it back?

By taking steps to establish strong accounting processes from the beginning, small businesses and startups increase their likelihood of success. Studies show that the more often a small business reviews its financial numbers, the better its financial health, which should ultimately drive long-term success. Although bookkeeping is not the passion of most small business owners, they must frequently review these critical financial metrics to capitalize on opportunities to grow and ensure their company is not on a path to insolvency

09/08/2021

Top 11 Small Business Accounting Tips

Separate business and personal expenses
Track every business expense
Accurately record income
Consider hiring a professional, even if temporarily
Automate accounting practices with accounting software
Dedicate time to update your books
Keep tabs on labor costs
Be prepared for major expenses
Maintain inventory records
Follow up on invoices and receivables to avoid overpaying on taxes
Create financial projections for future years

07/21/2021

These are great tips for any small business let is help you get on track offer one hour free consultation.

12 Small Business Accounting Tips To Grow Your Business

July 23, 2019 by Calvin Wilder in Articles
Your business’s accounting department is the driving force behind all decisions. Any choices you make regarding inventory, payroll, risk, or reporting come back to your books.

Naturally, it’s a business area ripe for optimization, and even smaller companies can boost their back-office efficiency with the right tweaks to their accounting and bookkeeping operations.

1. Develop a detailed budget
Naturally, you need detailed records of all business expenses and what kind of funding you’re working with. You might be surprised at how many small business owners bootstrap this process without getting everything down on paper. Get your budget on paper and start combing through the details, looking for cost saving opportunities in your record keeping, payroll, or sales operations.

2. Choose the right accounting method
Small businesses need to choose between cash and accrual accounting as they start out. Cash accounting is easier, but it’s difficult to sustain at a certain point in company growth. Make sure you understand the advantages of each option and how you can transition from one to the other effectively.

3. Separate business and personal expenses
Most accounting for small businesses involves dipping into personal accounts to cover business costs, but be careful about making this a habit. It’s a good practice to keep personal and business expenses separate in the interest of proper tax filing and legal liability. And if this isn’t possible, at the very least, document all personal contributions thoroughly so you’ll have accurate records for your business tax return.

4. Watch accounts receivables like a hawk
Your accounts receivables (AR) tell you plenty about customer performance, behavior, and long-term payment trends. Run an accounts receivable aging report regularly and pay attention to any discrepancies in how your customers make payments.

5. Follow up on invoices
Armed with your AR aging report, you’ll be able to see which customers are best at making payments on time, and which are chronically late. Look at your underperforming customers and reach out to them to confirm invoices. Just because you issued a bill doesn’t mean you’ll get paid—and your financial data can tell you which customers need more hands-on attention.

6. Master your accounting software
Few small businesses manage their books by hand. Accounting software is the name of the game these days, streamlining data entry, reporting, and analysis. But not just any software will do the trick. You’ll need to know the ins and outs of the platform, including how to tie it to your accounts, how to set up automated alerts for reporting, categorizing financial data, and more. This is one of the single best improvements you’ll make to your accounting workflows.

7. Set up a schedule for bank reconciliations
Bank reconciliations show you how closely matched your bank statements are with your own accounting records. This is an important part of understanding your company’s cash flow and how much liquid capital is available to you at any given point. It’s recommended that you run this report at least monthly, though different companies will need to set up their own reporting schedules.

8. Set clear financial goals
Financial management is like any other aspect of your company—you need goals to keep yourself on track. Work out metrics that offer insight into performance, such as cash flow, labor efficiency, or minimum monthly profits. Establish these benchmarks early and keep detailed records on how well they’re met.

9. Be ready for tax season
If your company is just starting out, you’re likely still getting used to preparing your business books for each tax season. Naturally, you’ll want to tread lightly, here. Tax liabilities and expectations are quite different for businesses than individuals, and depending on how your company is structured (LLC, sole proprietorship, general partnership, etc.) your tax needs will change.

10. Watch for changing regulations
Is your firm prepared to handle changing regulations set forth by the Financial Accounting and Standards Board (FASB) and SEC? Accounting practices evolve over the years (revenue recognition saw a big change just a year ago) and if you want your company to stay compliant with the FASB’s guidelines for Generally Accepted Accounting Principles (GAAP), you’ll need to keep pace. This is an ongoing goal for most small businesses, but it’s crucial to the long-term success of your company.

11. Consider your customer credit policy
It’s common practice for businesses to extend lines of credit to trusted customers (particularly when personal relationships are involved), but be careful about being too generous, here. Customer credit can quickly spiral into bad debt. If you’re giving your customers this flexibility, take a look at your credit screening process and make sure you’re trusting the right people.

12. Consider outsourcing certain tasks
The above tips can help business owners manage their books—but why manage everything on your own? Outsourced bookkeeping services are becoming viable for small businesses of all sizes. If you’ve identified bookkeeping inefficiencies that you can’t manage (such as knowing how to analyze financial reports), you can outsource these tasks to experts who can walk you through the details.

Small Business Accounting Tips
This is just an overview of the different ways that small business owners can optimize their accounting and bookkeeping processes, and it’s by no means the limit. With the right financial experts in your corner, you’ll find that even your working bookkeeping processes can be upgraded in some interesting new ways.

05/04/2021

Top 11 Small Business Accounting Tips

Separate business and personal expenses
Track every business expense
Accurately record income
Consider hiring a professional, even if temporarily
Automate accounting practices with accounting software
Dedicate time to update your books
Keep tabs on labor costs
Be prepared for major expenses
Maintain inventory records
Follow up on invoices and receivables to avoid overpaying on taxes
Create financial projections for future years

Would love to go over these with you to see how we can make these happen

11/03/2020

Looking for new clients if you need help getting your small business books in order I would love to help you. Offer a free consultation

We provide reliable, professional and accurate accounting and financial services for your business. We are based out of Windsor, Colorado.

07/27/2019

27 Money-Saving Tips From Successful Small Businesses
Sure, theoretical advice is nice, but when you're struggling to keep your business going, you want real help from people who've lived throug

Annie Mueller
Partner, Mueller Creative, LLC
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Sure, theoretical advice is nice, but when you're struggling to keep your business going, you want real help from people who've lived through the same situations. I've collected 27 money-saving tips from real small businesses that are succeeding in a tough economy. Real people, real businesses and real ideas to help you cut costs, lower your overhead, and still reach your target market and build your business.



1. Cut traditional advertising in favor of low-cost alternatives.


This is a popular move for small businesses and thanks to the many options in Internet marketing and advertising, it's possible to cut traditional advertising costs and still reach customers. Marissa K. Haynes of Wealth Management Group of NA, LLC, a 15-year-old business, recommends public relations as a much cheaper and more effective form of advertising. Haynes and her colleagues have used their expertise to be featured as credible sources in publications and media outlets.



John Boyd, CEO of cloud-based Meeting Wave, chose to stop paying for advertising and focus on inbound marketing. Shai Atanelov, CEO of BigTimeWireless, cut down even on paid Internet advertising (such as Google Adwords) and focused on getting results by using SEO techniques within the company website and creating YouTube videos, a move which garnered over 700,000 views and a boost in traffic to the website.

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2. Get sponsors for events.


Events can be huge draws for both old and new customers, and many businesses rely on regular events, from galas to seminars, to expand their customer base. Haynes recommends getting sponsors who will help carry the expense of events in exchange for some form of advertising within the event. It's usually a good trade for both the small business hosting the event and the sponsor paying for expenses, if the two are in related areas.



3. Outsource, outsource, outsource.


Employees are essential to getting work done, but employee costs—from salaries to office space to insurance—can be the biggest chunk of a small business's budget. Georgette Pascale, owner of PR Firm Pascale Communications, chooses to keep her full-time staff to a minimum and outsources work to independent contractors for the work that her staff cannot cover as needed.



Deborah Sweeney, CEO of My Corporation Business Services, Inc., uses the same method by hiring consultants as needed; Sweeney maintains that she can not only negotiate a lower rate with consultants, but that her business benefits from their more varied experience in their fields of expertise.



4. Negotiate with vendors.


What you've been paying your vendors does not have to be the final word on what you continue paying. Ultimately, vendors want to stay in business too, and they're dealing with a tough economy just as you are. Many are often willing to negotiate lower prices rather than lose a regular customer. Ian Aronovich, of GovernmentAuctions.org, shares that his firm was able to negotiate better prices on everything from office supplies to the phone bill. You certainly won't lose anything by trying, and you may find yourself able to shave several hundred dollars off your monthly operating costs.



5. Think beyond the cash box.


When that cash supply gets low, as it tends to do in small businesses, don't close the door on getting what you need. Pascale recommends the ages-old practice of bartering. She used bartering successfully by offering her own PR services in exchange for work by an interior design firm when she needed an office redesign. As with the vendor negotiation, the worst answer you can get is a simple no, and you might be surprised by how quickly you'll hear a yes.



6. Live in the cloud.


Frugal marketing advice gurus will give you a cloud-based solution before you even finish asking your question, but real small business owners recommend the same strategy. Boyd, of MeetingWave.com, avoids the cost of expensive hardware and uses cloud-based services to host data. Bibby Gignilliat, founder of San Francisco-based Parties That Cook opts for cloud-based software, "such as Salesforce, PayCycle and Staffmate where we pay per annual user, rather than needing to purchase and maintain expensive software in-house."



7. Cut extraneous employee expenses, not employees.


Aronovich says that his business used to provide free lunches to in-house staff, until 2009, that is, when the economy forced them to rethink their expenditures. Though neither the company nor the employees wanted to give up the perk, it was a better choice financially for them to offer a simple bagel breakfast on Fridays, save the money spent on the free lunches, and thus be able to keep their employees working rather than laying them off.



8. Embrace telecommuting.


Telecommuting isn't possible for all businesses, or for all employees within a business, but when it is, it can be a huge money-saver. Pascale's business was founded as an all-virtual agency from its beginning six years ago. Keeping things virtual allows small businesses such as Pascale's to avoid the expense of office space and the ongoing operating costs that come with it, and focus on producing work at minimum overhead. If you're not able to convert your entire staff to a telecommuting situation, find a way to convert at least some of them.



9. Go green to save green.


Going green is not only a great PR move, it's also a smart financial move, according to Shel Horowitz, author of Guerilla Marketing Goes Green: Winning Strategies to Improve Your Profits and Your Planet. Horowitz recommends simple moves such as keeping equipment on a power strip and turning it off when not in use, or replacing your existing printer with one that prints on both sides of the paper, thus reducing paper waste and cost. Since the object of many environmentally friendly changes is to save energy, and you have to pay for the energy your business uses, if you can reduce energy use you will also be reducing your costs.



10. Hire smart, inexperienced people.


Experience isn't everything, and it costs more. Next time you put up a job ad, eliminate the line that says, "Must have X years of experience," and replace it with "Recent graduates welcome to apply." Sweeney used this approach and hired developers who were fresh out of graduate school, gaining a monetary advantage by providing an entry-level salary and, she says, benefiting by having employees who are "up-to-date on the latest technology...often more nimble and eager to learn."



11. Clarify your policy on giving.


Rather than cutting out all charitable contributions, spend 20 minutes putting together a policy that will clarify your procedures and limits. This is especially helpful if you're in a food-based business, which can be overwhelmed by requests for "food donations" for fund-raising events, or if your business deals in other goods which charitable organizations need. Tracy Kellner of Provenance Food, a Chicago-based business, found this approach the best way to deal with the frequent requests she had to spend time answering. Instead of using her own time to respond, Kellner created a very specific policy, made it available via e-mail or as a physical document, and instructed her employees to hand it out to anyone seeking donations.



12. Negotiate with your landlord.


Joellen Sommer, a financial expert, suggests renegotiating a lease to save on costs. Gignilliat of Parties That Cook did just that and was able to save on one of the biggest expenses small businesses face. If prime retail space is important for your business, start asking about a better deal and cut down on that budget-buster.



13. Cut down on employee time.


Sommer also finds that her clients can cut many employees down to a four-day work week, which often works better for employees as well as business owners. A four-day work week means increased savings in utility and operating costs, as well as a lower salary cost for the business as a whole.



14. Practice guerilla marketing.


Guerilla marketing can not only get your business noticed, it can also save your business money. Nina Cunningham of Liberty Tax Servicepoints to their practice of using "Lady Liberty costume wavers" and on-the-street entertainment. They've been using these techniques since 1997, says Cunningham, and find that "for every two hours we have a waver, we get a customer."



15. Keep your meetings lean.


On-site meetings can be expensive in terms of travel and hosting costs, and even virtual meetings cost you in terms of billable hours or salary costs. If employees are sitting in a meeting, rather than producing work or getting new clients, you're losing money. You can't eliminate meetings altogether, but you can learn from David Lanagan, founder of SMB Communications. Lanagan recommends, first, that you limit the people who are required to participate in meetings. "By keeping client meetings to the lowest head-count possible," Lanagan says, "[I] ensure that my employees' time is well spent and that the associated costs are low."



16. Save on shipping.


Jessie Connors, CEO of luxury e-tailer Peppermint Park, which has been noted in publications such as O Magazine, notes that her shipping manager constantly checks and compares prices on shipping, negotiates better terms, and makes sure that they save every penny they can. As Connor states, "If we save a few pennies in shipping on each product the savings falls to the bottom line and can add up to become big money."



17. Cut down on maintenance.


Do you really need a daily cleaning service at the office? Sommer recommends reviewing ongoing maintenance costs such as these, and cutting back wherever possible. Employees can empty their own trash. A cleaning service can come in weekly instead of daily. Reduce the frequency of maintenance costs, and you can save money without reducing the maintenance or necessary service items completely.



18. Get interns.


Gignilliat found marketing interns from local schools for help with building the business' social media program. "They blogged, tweeted and posted to Facebook regularly," says Gignilliat, "which helped us improve our Search Engine Optimization and get more business." And using interns rather than full-time employees cuts way back on expenses, from salaries to benefits to office space. Combine this strategy with telecommuting and you'll be able to get a lot of work done for a fraction of the cost.



19. Review all expenses, even the little ones.


It's just smart business practice, but it's often overlooked until tough economic times force you into it. Aronovich remembers that, in 2009, they analyzed all company expenses to cut anything unnecessary. Small cuts in ongoing expenses can add up to large savings over the long-term. Review everything that isn't providing a ROI, cut back to the bare minimum, and completely eliminate anything extraneous.



20. Find a cheaper way.


You can often find a cheaper way to provide the same employee perks, as in the case of Gignilliat, who cut out the $900-per-year water cooler expense and replaced it with a filtered water pitcher. From $900 to $30 is a significant savings, and if you can accomplish that sort of financial savvy in more than one area, you can turn your business into a lean, profit-generating machine.



21. Buy in bulk.


Gignilliat's company switched to shopping the cheapest deals on office supplies such as inkjet cartridges, and purchasing from bulk warehouses or online suppliers to save money on both the product cost and the shipping cost. Analyze your ongoing expenses and pinpoint the ones that are purchased randomly or at middle-man suppliers. Check into bulk buying and see if you can't save a significant amount on those frequent-use items.



22. Use open source software.


Software, from the basic to the complex, is essential on some level in every business. Before you spend hundreds on software purchases or updates, check into the free open source alternatives. Boyd's company used open source software to build their online product, and you can find open source software for everything from photo editing to invoicing to accounting, project management, and document creation.



23. Do some old-school marketing.


Rhondalynn Korolak, managing director of Imagineering Unlimited, finds that the simple, old-fashioned practice of sending a hand-written thank you note to customers can have a huge return. Korolak has found that this practice alone "can lift sales by 10-20 percent," making it a definite worthwhile investment of five minutes of time and the cost of a stamp.



24. Create partnerships for marketing.


Boyd advocates creating partnerships with other startups to cut costs and increase reach on promotional efforts. Alicia Vargo, CEO of luxury lingerie store PamperedPassions.com, concurs: "We have given up the print and radio advertising and focused on related alliances, for example bridal shops, post mastectomy businesses, photographers, hospitals and plastic surgeons. These are related areas for us. The organic partnerships far outweigh an ad or a radio promotion."



25. Simplify your distribution process.


Atanelov allowed a financial crunch to lead to a complete overhaul of the business' distribution system, eliminating the practice of warehousing and shipping their own inventory and turning to suppliers instead to "create a drop shipping partnership with them." Says Atanelov, "Our supplier would ship directly to our customers for us... [they] agreed to do this on the condition that we bring in enough orders."



Look at the distribution process in your own business and find ways to simplify or eliminate the processes involved. Focus your business and your employees on their strengths, and negotiate smart agreements to keep your business moving forward.



26. Know your customer.


This simple advice from Allen Ash of Almar Sales Co, a family business founded in 1965, is perhaps the most applicable. Think of it in terms of your particular business. If you know your customers well enough to know where they actually go online, then you can focus your online marketing efforts there instead of spreading your resources out over a whole arena of Internet options.



If you know what your customers like, how they respond, what they want, and what they'll spend, you eliminate all the other options from your budget. Eliminating useless options means the money you do spend is more focused and will garner a better response, so you're not only saving money initially, but you'll be producing more profit from what you do put forth.



27. Reward your profit-makers.


It may seem a little backwards, but spending to save does make sense in some cases. Korolak recommends taking the proactive approach of rewarding profitable behavior from both your employees and your customers. What does that look like? For Conners, it means making little gestures, like an occasional free lunch or treat, to boost employee morale and keep the work environment positive.



It could also mean offering bonuses to employees who meet certain requirements for sales or productions, and offering deeper discounts or value-added packages to your most loyal customers. If you're spending a little money on the people who do the best work for you, or purchase the most product from you, you're simply investing in a relationship that will ultimately bring more profit to your business.