Get insights into ways to reduce operating expenses at your Michigan business from insights obtained at our recent CFO/Controller roundtable. Reducing operational costs has always been a challenge for CFOs and controllers. At our CFO/Controller Roundtable, Tim Hilligoss, CPA, MST, Shareholder of International Accounting Services at Clayton & McKervey, P.C., and Mike LaLonde, Director at Expense Reduction Analysts, introduced a tax, accounting, and operational perspective to the cost reduction topic. Their presentation triggered a discussion and exchange of practical ideas between the attendees at our quarterly gathering.
Following is a summary of the suggestions and valuable experiences shared at the collaborative event.
Tax credits, such as the Research & Development Credit, the Work Opportunity Credit, and the Small Business Health Credit, are examples of big cost savings that are frequently missed. For instance, recent legislative changes have widened the spectrum of qualifications for the R&D tax credit. Further examples of potential tax savings include the Domestic Production Activities Deduction, IC-DISC, cost segregation, grants, and current state governmental programs, such as Michigan Works! and Michigan STEP.
Another way for taxpayers to find potential savings are self-audits:
- Meals & Entertainment – Legitiment expense? Partially or fully deductible?
- Sales/Use tax – Should there be such on all bills?
- Real/Personal Property tax appeals – Can you account for all fixed assets?
And of course, every taxpayer should consider basic tax accounting techniques, such as pre-paid expenses, purchase rebates, cash discounts, and state tax apportionment.
Looking at the cost reduction topic from an operational perspective, emphasis was placed on shipping, merchant cards processing fees, discounts, and alternative work force. Further ideas and elaboration on the presented ideas offered even more:
- Examine pricing
- Examine classifications and discounts based on
- list prices
- Consider consolidating in-bound logistics
- Monitor delivery guarantees from shippers
- One delivery vs. multiple
- Merchant cards processing fees
- Note various methods to charge fees
- Consider base rate vs. effective rate
- Consider passing the extra cost to customers
- Credit card fees can be minimized, if security level charge is set up
- Must be off of an established list to be comparable
- Some industries/firms use, some do not
- Alternative workforce
- Consider flex schedules
- Remote employees
- Compressed work schedules
- Contractors/temp employees
In our group discussion, we also noted more ideas and operational cost reduction methods:
- Use credit cards
- Value points are one benefit of using credit cards for regular business payments. However, please note that value points and/or other rewards may increase taxable income
- One attendee mentioned they have a credit line of $400k with American Express, which can be a great source of cash and can be also used for travel
- Credit cards will not charge interest if paid within the grace period
- Oftentimes credit card companies will apply a discount if payment is made earlier than the next billing cycle
- Use of credit cards reduce check fraud, and furthermore, credit cards are a great means of control of employee’s expenses when used globally
- Upgrade your plant lighting
- According to one of the attendees, adding motion sensors, especially in the low-traffic areas of the plant, can be a huge saving on your energy bill
- Buying electricity non-peak is another way to reduce the bill significantly
- Investing in energy efficient technologies in the plant can also bring tax savings
- Always inspect your energy bill to make sure it doesn’t include sales tax on exempt manufacturing or engineering
- Focus on employee retention
- Implement reward programs to motivate employees
- Consider self-training vs. vendor training
- Mandate healthy life style
- Avoid bad hires, huge cost
- Use employees’ suggestions for cost reduction
- Consider PEOs for multi-state employee health care insurance
- Consider independent contractors vs. employees
- Health care act
- Social security savings
- Health care and human resources savings
- Cash flow spread
- Value inventory
- Research if there is value to your scrap. One impressive example of hidden savings is the scrap pallet
- Consider using Platts for pricing your metal scrap and audit it
- Watch free disposal