Tips and Tricks for Saving Money in the New Year

As the New Year approaches, the time is ripe for making resolutions about managing the finances of your small business. Whether you’re saving up for an expansion, paying down your small business loan, or simply trying to stay afloat in rough economic times, here are some great money-managing tips to get your new year started right.

Savings first!
Setting up a savings account for your small business is a great way to ensure that your business has a nest egg for the future, as well as being a great way of earning interest on any accumulated funds that will go towards bills or your estimated taxes. If you usually find that your efforts to put aside money at the end of the month are thwarted by a distinct lack of money come month’s end, fear not. This common problem is easy to fix by making your savings automatic. Calculate it as a fixed expense in your company’s budget, and set up an automatic transfer at the beginning of every month. If it’s not in your checking account to begin with when the month starts, you’re much less likely to miss the money than if you manually set it aside yourself. Once the money’s been put into savings, you can breathe easier knowing that it’s there and ready for a rainy day.

Consider a Bucket Budget
If trying to make a traditional budget makes you see stars, set up a “bucket budget” instead. You’ll need to set up two checking accounts (your bank or accountant will be happy to arrange this). Calculate all of your fixed monthly overhead expenses: office space, phone and internet connections, etc. From the first checking account, set up automatic payments for as many of these expenses as possible. From the remainder of your monthly income, set up weekly transfers of ¼ the total of the remainder into the second checking account. This is your weekly budget for incidental expenses, like pens, printer ink, and the occasional box of doughnuts for your hardworking crew. That way, you won’t have to worry about micromanaging the details of how many pens or doughnut boxes you can afford in a month while still maintaining your office, because incidental expenses and overhead expenses are in two completely separate “buckets.”

Use the “Rule of Thirds”
If you have extra money in your bank account after the holidays, from extra holiday business or from some other windfall, use the “rule of thirds” to help you use it wisely. One third of your windfall should go to the past—use it to pay down any debts you may have accrued in starting or operating your business. One third should go to the future—put it in a savings account of some kind, either for a long-term investment in expanding your business or a shorter-term goal of replacing that temperamental copy machine. The last third should go to the present—fix up something in the office that’s been bugging you for ages, and give yourself and your employees a treat. You deserve it for managing your money so well!

Stack Your Debts
If you have multiple areas where you owe, sort your debts by interest rate rather than by total balance. For most of your debts, pay only the minimum amount due per month. For the loan with the highest interest rate, pay off as much as you can afford each month until the debt is gone. Then pay off the loan with the next-highest interest rate, and so on. Stacking your debts like this will save you money on interest in the long run, and it will also give you a huge sense of accomplishment to watch one of your debt accounts completely disappear.

Be a Smart Shopper
Running a business involves a number of incidental expenses that can quickly add up if you’re not careful. If the tally from your office-supply staples is through the roof, look for ways to cut down on costs. See if your suppliers have discounts or loyalty programs specifically geared to small businesses. Look at retailers and wholesalers online to see if you can buy frequently-used supplies in bulk. If you purchase most of your supplies in one place, ask (politely and professionally) for a loyalty discount or a discount on high-volume purchases. Look at any name-brand products that you purchase regularly and see if there are non-name-brand alternatives at better prices. The less of your monthly income goes to incidental expenses, the more you have available to save.

With these money-saving tricks up your sleeves, you’re well on your way toward accomplishing your new year’s resolution of improved financial management. By managing your money well this year, you should have the capital you need to re-invest in your organization and make your small business a success.